Mumbai: With the Reserve Bank hiking its repo rate and cash reserve ratio, banks are expected to hike their lending and deposit rates this week, adding woes to the common man already hit hard by the double-digit inflation.
RBI hiked the short-term lending rate by 0.5% last night and increased the CRR, the slice of deposits banks have to keep with the apex bank, by 0.5% in two tranches to suck out up to Rs19,000 crore from the system.
Corporation Bank Chairman and Managing Director B Sambamurthy told PTI that the bank’s Asset Liability Committee (ALCO) would meet soon to review its interest rate structure.
“We are looking at a balanced revision in rates, which would comprise a simultaneous hike in both advances and deposit rates. The bank will meet very soon to assess the situation,” Sambamurthy said.
Echoing a similar view, Bank of India’s Chairman and Managing Director T S Narayanasami said the rates would soon start heading northwards.
BoI’s ALCO is likely to meet on June 30 to take a view on the matter.
“We will be raising our lending rates. What remains to be decided is the quantum of the raise,” Narayanasami said.
Though he declined to elaborate further, it is understood that the bank is looking at an up to 0.5% hike in its lending rates.
Manipal-based, Syndicate Bank’s Executive Director George Joseph said the bank is closely watching the market prior to taking any steps on its rates.
“We are watching the market conditions... Our ALCO will meet on Friday and would take a view on the issue,” he said.
IDBI Bank Chairman and MD Yogesh Agarwal said RBI’s move was “on expected lines” and was a “continuation of the central bank’s tight monetary stance”. IDBI would take a call on its lending rates at its ALCO meet “which would meet shortly”, he said.
A few banks, such as Jammu & Kashmir Bank, Yes Bank, HDFC Bank, have already announced a revision in their BPLR in the range of 0.25% t to 1%.
State-owned Bank of Baroda is also likely to revise its rates later this week and its ALCO is scheduled to meet some time this week, its CMD M D Mallya said. “Lending rates, across segments, would go up,” Mallya said.
Another public sector bank Chairman and MD, S K Goel of UCO Bank, said that the RBI move was aimed at curtailing demand and rein-in the runaway inflation.
“There would be a heavy upward pressure on both short- term lending and deposit rates. We might look at a 0.25-0.5% revision in both deposit and lending rates,” he said.
UCO Bank’s ALCO meet is scheduled on 29 June, Goel said.
Country’s second largest public-sector lender Punjab National Bank said it is likely to raise its Prime Lending Rate (PLR) by 0.5% while a similar hike in deposit rates is also expected.
“Prime lending rate would go up by up to 50 basis points with the hike in CRR and repo rate,” PNB Chairman K C Chakrabarty said.
The central bank’s move to raise repo rate and CRR follows RBI Governor Y V Reddy meeting the Prime Minister and Finance Minister last week after inflation touched a 13-year high at 11.05% due to an unprecedented increase in global crude oil and commodity prices.