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  • FM confident of banks not hiking rates; lenders differ

    Published on August 14, 2010

    Finance minister Pranab Mukherjee exuded confidence that banks will not raise their interest rates in response to RBI’s tight monetary policy even as lenders indicated that they will be upping their lending and deposit rates.

    “No I don’t think so. Banks are fully aware of it and they have taken note of it and they have adjusted their plans accordingly,” Mukherjee told reporters when asked whether RBI’s tight monetary policy will affect interest rates.

    However, a number of PSU banks have already raised their deposit rates and lending rates for existing borrowers and few other lenders have indicated that they will be doing it soon.

    Country’s largest lender SBI Chairman O P Bhatt said, “I think there is an upward bias (on interest rates) that will take place.”

    He said most of the banks have so far raised interest rates in the range of 25-50 basis points. The highest has been in the case of PNB, to the extent of 75 basis points, Bhatt said.

    “So I would put it (hike in interest rates by PNB) at the extreme end. It cannot be more than that. It has to be less than that,” Bhatt said.

    To a question as which sector will see rise in interest rates he said, “That would depend on bank to bank and their strategy.”

    The RBI, in its monetary review on 27th July, raised the short-term borrowing (reverse repo) rate by 50 basis points and lending (repo) rate by 25 basis points.

    It, however, kept the cash reserve ratio — the portion of deposits banks is required to park with the central bank in cash — unchanged.

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