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Banks rule out immediate hike in lending rates Mumbai: Despite a more than expected hike in the Cash Reserve Ratio, banks Friday ruled out any immediate hike in the lending rates as they believe that liquidity is still abundant in the system to absorb the increased cash requirement. However, an expected pick up in the credit growth in the coming months and prevailing liquidity conditions may be decisive in deciding the course of interest rate movements over the next few months, they said. "There may not be an immediate hike in the lending rates as liquidity at the moment is sufficient. We need to see how the liquidity conditions pan out. Going forward, as the credit off take picks up, there may be an increase in rates," State Bank of India Chief Financial Officer, S.S. Ranjan said. With a view to tackle the ballooning inflation, the RBI hiked the cash reserve ratio, the amount banks have to park with the central bank, by 0.75 per cent to 5.75 per cent but left the key rates untouched. Private Sector Yes Bank’s Manging Director and CEO, Rana Kapoor echoed this view saying that an immediate hike in lending rates in the system appears unlikely as the system has enough liquidity to absorb the upped cash reserve requirement. "I don’t think there is any immediate pressure on interest rates. The RBI has given a very good message that growth is the priority. I don’t see any immediate impact on the rates," Kapoor said. Another leading private sector lender, Kotak Mahindra Bank’s Head of retail liabilities K.V.S. Manian said that 0.75 per cent hike in CRR can put upward pressure on short-term rates. "I would say that a slight upward pressure in short term lending rates can be expected. However, long term rates are unlikely to be affected in the near future unless credit growth picks up significantly," Manian said. ABN Amro’s Country Head, Meera Sanyal welcomed the RBI actions terming it as a vivid signal of central bank clearly targeting the abnormal rise in inflation rates. "The signal is that they (RBI) are clearly targeting inflation very strongly," Sanyal said. However, given a slow credit off take in the system, banks are unlikely to effect any increase in the loan rates at least in the near future, she said. Also, the apex bank is likely to hike the short term rates--repo and reverse repo before the annual policy review to signal hardening of interest rates in line with the pick up in the credit growth in the system, Sanyal said. Back |
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