RBI unlikely to hike interest rate

MUMBAI: Reserve Bank on Monday hinted it is unlikely to tamper with benchmark interest rates in its bid to keep inflation around 4-4.5 per cent, amid reports that lenders recorded a sharp dip in housing and consumer loans.

While inflation has eased to 4.41 per cent from 6.69 per cent in January, housing finance sector declined in the first quarter this fiscal warranting some interest rate moderation by RBI in its quarterly review of monetary policy tomorrow.

"The resolve going forward would be to condition policy and perceptions for inflation in the range of 4-4.5 per cent. This objective would be conducive for maintaining self- accelerating growth over the medium term," RBI said in its Macroeconomic and Monetary Development report released today.

RBI's intervention becomes more important in view of the fact that leading housing finance players like ICICI Bank and HDFC have reported a sequential dip in housing loan disbursals by 42 and 35 per cent respectively in April-June 2007.

RBI has raised key lending and borrowing rates five times and Cash Reserve Ratio thrice since mid-2006. Since inflation has moderated after these measures, bankers and economists were optimistic there may not be any hike in rates tomorrow.

ICICI Bank managing director and CEO K V Kamath said: "...liquidity is comfortable, inflation is under control, credit offtake is going down. I am sure RBI will keep these factors in mind while reviewing the credit policy."

LIC Housing Finance director and chief executive S K Mitter too said: "We only wish that the RBI does not do any thing that would have an adverse bearing on interest rates".

Analysts, however, said RBI may slightly tighten the policy especially in view of the higher growth in broad money supply which recorded a growth of 21.6 per cent as of July 6, 2007 compared to 19 per cent a year ago.