No immediate hike in lending rates, say bankers

Despite a more-than-expected hike in the Cash Reserve Ratio (CRR), banks today ruled out any immediate hike in lending rates

Retail and corporate borrowers can breathe easy as bankers today said that an immediate hike in lending rates is unlikely even as the RBI tightened money supply by raising the CRR by 75 basis points, reports PTI.

"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’s chief financial officer S S Ranjan told PTI.

IDBI Bank director Sushil Munhot echoed his sentiments. "I doubt if there would be a hike in interest rates immediately as there is enough liquidity in the system,” he said.

According to Corporation Bank executive director Asit Pal, there would not be any change in prime lending rate as there is sufficient liquidity in the system and credit off-take is also muted at this point of time. However, Mr Pal said that there could be some spike in inter-bank call rate.

Shubhada Rao, chief economist at Yes Bank, said that rate hikes would depend on the overall growth dynamics. "Rate hikes are unlikely in the immediate horizon as economic growth is still on the agenda. I don't see banks upping their interest rates—at least, not yet," Mr Rao said, adding that liquidity was comfortable and would remain comfortable even after the two-tranche CRR hike announced today.

In its third quarter monetary policy review, the RBI raised CRR by 75 basis points to 5.75% to mop up Rs36,000 crore from the system. However, the apex bank retained short-term lending and borrowing rates at 4.75% and 3.25%, respectively.
 

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