No immediate hike in rates; upward bias remains: Central Bank

No immediate hike in rates; upward bias remains: Central Bank

New Delhi: State-run Central Bank of India on Thursday said Reserve Bank of India’s (RBI) credit policy initiative has increased pressure on interest rates.

“Interest rate situation has been kept under review. There is a upward bias on interest rate and the liquidity situation is a bit tight," Central Bank of India CMD S. Sridhar told reporters here.

However, the bank would not hike interest rates in the near term, Sridhar added.

Earlier this week, the RBI hiked key short term lending (repo) and borrowing (reverse-repo) rates by 25 basis points each to check high inflation.

The policy rate hike is a signal of rising interest rates, but banks had said that they will not rush to hike rates immediately.

The short-term lending (repo) rate now stands at 6.5% and the borrowing (reverse repo) rate at 5.5%.

“There is a general upward bias on interest rates," he said adding the bank has hiked deposit rates earlier this month and would not go for another round of deposit rate hike immediately.

He said the bank would see a credit growth of about 22% in the current fiscal. At the end of March 2010, Central Bank’s advances stood at Rs1.07 lakh crore.

“Currently our credit growth is 22%. We expect to end the fiscal with a 20-22% credit growth," Sridhar added. At the end of second quarter ended 30 September, 2010, the bank’s advances stood at Rs92,212 crore.

Central Bank today launched the e-stamping services, which is a part of e-governance initiative. Under this the bank has partnered with Delhi government for stamping documents electronically.

On the bank’s proposed Rs2,500 crore rights issue, Sridhar said it will hit the market before the end of the current fiscal.

“We are waiting for Sebi approval. The issue will come before March," he said.

The government has already approved rights issue for the lender in June last year.

The government holds 80.2% stake in the bank and therefore it will have to subscribe an equal percentage in the proposed rights issue to retain the present level of ownership.

Shares of Central Bank of India were trading at Rs176.35, down 1.89% over previous close on the Bombay Stock Exchange.