Repo hike won't trigger lending rate increase: Vijaya Bank

Vijaya Bank is not in a hurry to pass on the hike in repo rates to its customers. Answering a query on whether they would now tinker with base rate and deposit rates, HS Upendra Kamath, CMD, Vijaya Bank said it was too premature to decide on the issue. "The trigger for increasing the base rate for our lending purposes was certainly not a hike in the repo rate from 7.25 percent to 7.50 percent," he added.

Reactions to RBI monetary policy, he said there would be beneficial impact on the overall cost as a result of the reduction in the marginal standing facility (MSF) rates, the reduction in the daily maintenance of CRR and so, the hike in the repo rate will get more than compensated.

Also read: Cannot let guard on rupee, inflation slip,say C Rangarajan

Moreover, the overall repo borrowing in the bank’s overall resources profile is insignificant and therefore there will not be any significant cost pusher as a result of RBIs increase in the repo rate, said Kamath.

The beneficial impact of both the reduction in the MSF rate by 75 bps, and the reduction in the daily maintenance of CRR from 99 percent to 95 percent will have some beneficial impact. Therefore, the short-term interest rates which were heightened as a result of these liquidity squeezing measures will now start easing. In fact it has already started easing, Kamath said adding "we would rather wait and watch and then respond as to what needs to be done by individual banks."

"My net-net personal take is that there will be a beneficial impact on the overall cost as a result of the reduction in the marginal standing facility (MSF) rates, reduction in CRR and the hike in the repo rate will get more than compensated," he said.