Mumbai, March 20: The nation’s largest lender State Bank on Friday hinted a hike in its lending rates moving ahead while its nearest competitor ICICI Bank said it would assess the market conditions before taking a call, following RBI’s rate hike.
“The signal from the Reserve Bank is that money is going to be costlier,” SBI chief financial officer SS Ranjan told a news agency here.
Ranjan, however, hinted that the bank is unlikely to increase its lending rates at least in the remaining part of this fiscal and would evaluate market conditions prior to taking any decision.
The bank’s ALCO (asset liability committee) is likely to meet very soon to take stock of the prevailing market conditions following the apex bank’s rate action, he said.
Ahead of the annual policy on April 20, the RBI on Friday hiked its repo and reverse repo rates (short-term lending and borrowing rates) by 0.25 percent to 5 percent and 3.5 percent, respectively.
Expressing a similar view, ICICI Bank managing director and chief executive officer Chanda Kochhar said the bank would assess the market situation before taking a call on any rate revisions.
“Currently, there is ample liquidity in the market. We need to wait and see the credit offtake and systemic liquidity to assess the medium-term impact on lending and borrowing rates,” Kochhar said.
The Reserve Bank had signalled an exit from its easy monetary stance when it hiked the cash component banks have to deposit with the RBI by 0.75 percent in January.
A majority of the bankers echoed similar view when asked whether they would up their lending rates.
UCO Bank chairman and managing director SK Goel said there could be a hike in the lending rates but the situation has to be assessed over the next two weeks. “The RBI action will have a substantial impact on the liquidity in the system and will result in a rise in interest rates. But we have to wait and watch for one or two weeks before taking the final
call,” Goel said.
Yes Bank chief Rana Kapoor also said he does not expect any immediate hike in the interest rates. “Inflation is certainly top of the mind as far as the RBI is concerned. The 0.25 percent hike in the repo and reverse repo has already been factored in and so this hike may not act as a trigger to
raise rates (by banks immediately),” Kapoor said.
Hiking the rates, the RBI said, “These measures should anchor inflationary expectations and contain inflation going forward.”
Wholesale price inflation has surged to 9.89 percent in February as compared to 8.56 percent in January, putting pressure on both the monetary and fiscal authorities to take immediate actions to check the prices.
The Reserve Bank, which is scheduled to announce its annual monetary policy on April 20, had signalled an exit from its easy monetary stance when it hiked the cash component banks have to deposit with RBI by 0.75 percent in January.
A majority of the bankers echoed the same view when asked whether they would up their lending rates.
UCO Bank’s Chairman and Managing Director, S K Goel, said there could be a hike in lending rates in the industry but the situation had to be assessed over the next two weeks.
“The (RBI) action will have a substantial impact on the liquidity in the system and will result in a rise in interest rates. But we have to wait and watch for one or two weeks before taking the final call,” Goel said.
Yes Bank’s Chief, Rana Kapoor, also said he did not expect any immediate hike in banks’ interest rates.
“Inflation is certainly top of the mind as far as the RBI is concerned. The 0.25 per cent hike in the repo and reverse repo has already been factored in and so this hike may not act as a trigger to raise rates (by banks immediately),” Kapoor said.
Hiking the rates, the RBI said, “these measures should anchor inflationary expectations and contain inflation going forward.”
Wholesale Price Inflation has surged to 9.89 per cent in February as compared to 8.56 percent in January, putting pressure on both the monetary and fiscal authorities to take immediate actions to check the prices.
—–PTI