As expected Reserve Bank of India (RBI) has raised the cash reserve ratio (CRR) by 25 bps to 6% along with repo and reverse repo rates being upped by 25 bps to 5.25% and 3.75%, respectively. Given the comfortable liquidity in the market, we do not expect banks to hike deposit rates and the prime lending rate for now, though there is a high possibility that the at the short end of the market could start inching up. Overall we expect the interest rates to rise by 100- 150 bps over FY2011 but do not expect these to impact the Banking sector earnings as the buoyant economy can easily offset the impact of the rising rates. However the CRR may not rise more significantly as the robust credit growth and excessive CRR hikes can lead to liquidity tightening. Overall we expect the RBI to continue taking baby steps in its monetary policy rollout as its stance changes to managing inflation by anchoring inflation expectations, retaining adequate liquidity and maintaining a pro growth rate structure.