HDFC’s Parekh sees RBI rate hike, but trashes it

HDFC Bank chairman Deepak Parekh on Thursday said the Reserve Bank of India is expected to raise key short-term rates by 25-50 basis points in its policy review later this month – but added that this would hurt growth without impacting food inflation.

''The RBI may be looking at an increase (of short-term rates) at 25-50 basis points ... but I personally feel that interest rates are already high and it will impact the growth of retail loans and housing,'' Parekh told reporters on the sidelines of 5th Global Summit of Vibrant Gujarat at Gandhinagar.

Expressing doubts over taming food inflation through rate hikes, he said food inflation is a supply side problem and not a monetary problem. ''So, I would like to see interest rates remain the same and the government tackling food shortage in a different manner,'' he added.

Food inflation moderated, but still remained at an elevated level of over 16 per cent for the week ended 1 January.

''We have seen that inflation numbers are so high, mainly food inflation. However, there are statements from the government that it will come down to 7 per cent by March,'' Parekh said.

The chairman of the country's second-largest lender also wanted RBI to cut the requirement of banks to keep a certain percentage of their deposits with the central bank since the system is still facing a cash crunch.