New Delhi: Cash crunch in the system, coupled with high inflation, will keep interest rates at higher levels in 2011, reports PTI quoting the Associated Chambers of Commerce and Industry (Assocham).
With inflation likely to rise further, the Reserve Bank of India (RBI) may go in for another hike in the key policy rates in its fourth quarterly review, slated to be announced on 25th January.
Inflationary pressures are building up with commodity prices shooting up the world over as well as crude touching $90 per barrel, the chamber said.
High inflation would put pressure on the RBI to go in for tighter monetary policy-hiking rates at which it lends to and borrows from other banks-which, in turn, helps curbing consumer spending and taming the rate of price rise.
Inflation continues to be much higher than the tolerance level of 5.5% per annum, as projected for the end of the current fiscal.
Both, food as well as overall inflation have been much higher than this level for most of this year.
Food inflation surged back into the double-digit territory at 12.13% for the week ended 11th December as the prices of vegetables, particularly onions, rose for the third consecutive week.
Meanwhile, although overall inflation for November was at 7.48%, down from 8.58% in the previous month there are concerns that it may rise again.
"The days ahead are extremely dicey...The options with RBI are limited as the growth is not likely to be sacrificed for inflation. Hence there is every likelihood of policy rates to inch up in the next monitory policy," Assocham president Dilip Modi said.
The chamber also said that faster credit growth has put pressure on the liquidity and the crunch is likely to remain in 2011 because high inflation has dissuaded investors to park funds with banks, as reflected in low deposit growth.
RBI has partially blamed the sluggish growth in bank deposits for aggravating the shortage in money supply. This could partly be attributed to negative returns these deposits fetch for people, compared to inflation rate.
However, it said that the recent mid-quarter monetary policy of the RBI has supported the liquidity market which would sustain growth in credit offtake.
The Central Bank of India may soon foray into the UAE to tap business opportunities in the region, according to a media report.
The public sector bank, which is marking its centenary year celebrations in 2011, is exploring possibilities of setting up a representative office in the Emirates, and opening of a branch at Dubai International Financial Centre (DIFC), an offshore financial district, a Khaleej Times report has said.
"Foraying into the Gulf region is a part of the bank's overseas expansion plan that will see the sleeping giant embarking on an aggressive growth swing after a period of stagnation," Central Bank of India executive director Rajeev Kishore Dubey said.
Dubey had earlier told PTI that the bank plans to expand to Hong Kong, Bhutan, Nigeria, Tanzania and Mozambique.
On Friday, Central Bank of India ended 0.85% down at Rs175.30 on the Bombay Stock Exchange, while the benchmark Sensex closed 0.45% up at 20,073.66 points.
Real estate firm Housing Development and Infrastructure Ltd (HDIL) said it has launched the second phase of its mega-township project, Paradise City, being developed at Palghar (West) in Mumbai.
The company will offer 3,000 units-including 1-RK, 1, 2 and 3-BHK houses-under the second phase of the project, which will range from 340-940 square feet in size, besides shops ranging from 5,155-7,950 sq ft.
Almost 100 per cent of the units developed under the first phase of the project were sold out in less than two weeks, the company said in a statement here.Paradise City is an affordable housing project that HDIL claims will offer the convenience of modern living, coupled with a green and clean environment. The entire project will offer over 20,000 homes at affordable prices, it said.
On Friday, HDIL ended 1.79% up at Rs190.75 on the Bombay Stock Exchange, while the benchmark Sensex closed 0.45% up at 20,073.66 points.