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"Many banks can be expected to hike their PLRs next week," IBA chief executive H N Sinor said.
"Some of them could even hike rates by one per cent," he added. The Reserve Bank had on Tuesday raised the cash reserve ratio of banks by 50 bps in two phases, aimed at shackling inflation, which had spiralled to 6.58 per cent last week.
The move is also aimed at flushing out around Rs 14,000 crore (Rs 140 billion) from the banking system, thereby tightening liquidity.
"Clearly the RBI is concerned with inflation and its Governor Y V Reddy used the most blunt tool available - hiking the CRR of banks," Sinor said.
He, however, described some of the tough monetary measures taken in recent times as "temporary" and expected the situation to ease in the next few months.
One had to watch the lending data and inflation numbers in March, he said, adding that "if they showed a declining trend, then it will mean that the RBI measures are working."
"The lagged effect of some of the measures taken in the past will also begin to make their impact by then," he said.
Sinor said one also had to look at positives existing now such as a very healthy economic growth as well as the prevailing low fiscal deficit at around three per cent. "State finances have improved considerably and tax collections have also been very high," he said.
On possible reduction in the statutory liquidity ratio, Sinor said the RBI might consider reducing it in phases next fiscal. "Much will depend upon the government's borrowing programme," he said adding that its borrowings were expected to reduce next fiscal.