Banks unlikely to raise rates on surprise RBI rate hike

Moneycontrol Bureau

Banks are unlikely to hike their lending and deposit rates on the back of the surprise rate hike by the Reserve Bank of India. That’s the word coming in from the country’s largest lender State Bank of India. The RBI unexpectedly raised its policy interest rate on Tuesday by 25 basis points (bps) but said that if consumer price inflation eases as projected, it does not foresee further near-term tightening.Although the move was unexpected, RBI Governor Raghuram Rajan softened its impact by saying he did not foresee further near-term tightening if consumer price inflation eases, according to a central bank statement."We will be having an Assets and Liability Committee (ALCO) meeting probably this evening or maybe tomorrow. We will take a hard look at the way the rates are there in our bank right now. But having said this, maybe I would like to also point out that, as far as we are concerned in State Bank of India (SBI), we still are rate of growth in deposits is still far outstripping the rate of growth in advances. As of now it looks unlikely but we need to look at the overall data and then take a decision at the ALCO," A Krishna Kumar, MD, State Bank of India told CNBC-TV18’s Latha Venkatesh.Likewise, Bank of Baroda's Ranjan Dhawan sees very little impact of the rate hike as he says there would be increase in credit offtake during the current quarter. “I do not see any substantial changes in rates going forward. Some banks have already increased rates over the last month or so. Going forward, let us see how the market pans out,” he said.

Written for the web by Sagar Salvisagar.salvi@network18online.com