RBI may raise reverse repo rate by 50 bps, repo rate by 25 bps: Nilesh Shah

Nilesh Shah, Deputy Managing Director, ICICI Prudential AMC

Do you think that the RBI is seriously behind the curve. We have already shifted from reverse repo which was 3.25% at the start of the year as the binding rate to the repo rate as the binding rate now. That's already 225 basis points of tightening but does that not appear to be enough?

If you see from an inflation point of view then the stubborn inflation upwards of 10% does give an impression that RBI probably is little bit behind the curve. Probably RBI will surprise the market by raising reverse repo rate by 50 basis point to show their commitment towards controlling inflation and probably raise the repo rate by 25%. That way they are controlling inflation and at the same time not destroying growth. I think that will be a reasonably good combination.