Mumbai, January 18: Indian banks are unlikely to raise lending rates in the near term even if the Reserve Bank of India (RBI) signals a tightening of monetary India’s road to economic reform policy by raising the cash reserve ratio (CRR) in its upcoming policy review in less than a fortnight, according to several bank chiefs.
Bankers, economists and bond markets are anticipating a hike in the CRR, a slice of deposits that banks have to mandatorily park with the central bank.
A large number of bank CEOs told ET that they will not consider hiking the prime lending rates (PLR) even if RBI hikes the CRR by half a percentage, or 50 basis points (bps). These bank chiefs do not want to tweak rates in the near term now, given the surplus liquidity in the system and poor demand for loans.
The surplus liquidity sloshing in the banking system daily is on an average in the range of Rs 50,000 crore-60,000 crore, which is reflected in the money parked by banks with RBI through its reverse repo window. A 50-bps hike in CRR will drain out Rs 21,000 crore from the system. The CRR is now at 5%.
—-Agencies