CNBC-TV18 Poll: Lending rates to go up in Q3 FY11

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

At an unexpected time, but on expected lines the Reserve Bank of India raised its key lending and borrowing rates late last week, wherein the repo rate was raised to 5.50% from 5.25%, and the reverse repo rate to 4% from 3.75%.

What does this mean in terms of the situation on the ground-will your deposit returns or your EMIs go up, if so, when? CNBC-TV18's Gopika Gopakumar polled a lot of bankers and laid out a dip-stick survey.

We did a poll of bank chairmen and executive directors on their outlook on interest rates and it was found that almost all bankers polled believed that the Reserve Bank will hike both repo and reveres repo rates by 25 basis points and subsequentially one-third of the bankers poll said they expected a 25 bps hike in the deposit rates in the July-September quarter. However, another one-third said they expected a 25-bps hike in deposit rates only after the September quarter was over. They want to watch out for the credit growth to pick up and also want to see how the liquidity condition pans out in the coming three months.

The rest of them believed there would not be hike in deposit rates because they felt the bank was sufficiently liquid and didn't see any need for a hike.

As far as lending rates go, a majority said they expected 25 bps hike only in the third quarter. They believed that the credit growth hadn't picked up so far and wanted to watch out for it to pick up in the third quarter. However, a minority expect that the lending rates would be raised by 25 bps in the second quarter itself. And the rest believe there won't be a hike in lending rates at all anytime soon.