Bankers see hike in interest rate after RBI’s credit policy

After the Reserve Bank of India’s credit policy, bankers have started hinting for further hike in interest rates. On Tuesday RBI in view of restricting current inflationary trends and to tighten credit growth has revised the Cash Reserve Ratio (CRR) by 25 basis points and the repo rate by 50 basis points.

Expressing his views Bank of Baroda chairman and managing director MD Mallya told IANS said, "It is too early to comment on a rate hike but the pressure seems inevitable. We will have to analyze this soon before taking any decision".

Mallya further added that in view of current condition of the market, one needed to be very cautious. "By hiking repo rate and CRR, RBI has clearly indicated that it is serious about curbing inflation," he added.

Bank of India chairman and managing director T.S Narayanasami in his statement said RBI wanted inflation to be under control rather than moderating it, and added: "We expect an increase of minimum 50 basis points of prime lending rates (PLR)."

On the other hand Punjab National Bank chairman and managing director KC Chakrabarty said bankers will be passing on the burden to customers.

"I expect a raise in interest rates in coming weeks," Chakrabarty said.

Commenting on RBI’s hike in CRR, ABN AMRO country executive Meera Sanyal said as she expected a CRR hike to tighten liquidity conditions, "the repo rate hike clearly signals that RBI wants the credit growth to ease off".

Similar views were expressed by Indian Overseas Bank chairman and managing director S.A. Bhat. He told IANS, "We expected increase in cash reserve ratio but not the repo rate". "The credit policy measures have come as a bolt from the blue."

He, however, informed that his bank will not increase interest rates on deposit, as existing rates had factored in changes in the RBI policy

While giving her views ICICI Bank vice chairman Chanda Kochhar told television channel her bank will "definitely" look at further hike in interest rates, but agreed bankers will have to come up with tightening measures.