Bankers hint at hike in interest rates

Tuesday, 29 July 2008, 07:00 Hrs
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Mumbai/Chennai/New Delhi: Bankers Tuesday hinted at further hikes in interest rates after the Reserve Bank of India (RBI) revised the Cash Reserve Ratio (CRR) by 25 basis points and the repo rate by 50 basis points to restrain current inflationary trends and to tighten credit growth.

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

Mallya said that in the present market conditions, 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 said RBI wanted inflation to be tamed rather than moderating it, and added: "We expect an increase of minimum 50 basis points of prime lending rates (PLR)."

Punjab National Bank chairman and managing director K.C. Chakrabarty said bankers would pass on the burden to customers.

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

ABN Amro country executive Meera Sanyal said while she expected a CRR hike to tighten liquidity conditions, "the repo rate hike clearly signals that RBI wants the credit growth to ease off".

Indian Overseas Bank chairman and managing director S.A. Bhat expressed similar sentiments.

"We expected increase in cash reserve ratio but not the repo rate," Bhat told IANS. "The credit policy measures have come as a bolt from the blue."

He, however, said his bank would not increase interest rates on deposit, as existing rates had factored in changes in the RBI policy.

ICICI Bank vice chairman Chanda Kochhar told television channel her bank would "definitely" look at further hike in interest rates, but conceded bankers would have to bear with tightening measures.
Source: IANS
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