Bankers indicate rise in lending rates

Leading bankers today indicated that lending rates could go up following the Reserve Bank action on the rate front today though it may take some time.

For the 12th time running since last March, the monetary authority today increased short-term lending or repo and the short-term borrowing or reverse repo-by 0.25 percent to 8.25 and 7.25 percent, respectively, to tame high inflation which has been sniffing at 10 percent for the fourth month in a row. For August, the headline inflation stood at 9.78 percent.

When contacted, SBI Managing Director and Head of National Banking A Krishna Kumar told PTI that "our asset liability committee will meet and take a decision on passing on the rate increase to customers or not."

Terming the RBI action as expected, he said, "the central bank has to control inflation, which is highly above its comfort zone."

The largest mortgage player HDFC Managing Director and Chief Executive Keki Mistry too supported the RBI action saying "with inflation at 9.8 percent and the steep hike in petrol prices yesterday, left no room for RBI but to continue its tight monetary policy."

However, Mistry parried a query on whether he will look at hiking the lending rates.

Bank of India Chairman and Managing Director Alok Kumar Misra, said the RBI had a tough task of prescribing a 25 bps hike in policy rates against the background of declining domestic growth and industry preference for a pause. "By going for a rate hike, RBI has signalled that it remains focused on inflation. Today's rate hike will help to contain inflationary expectations."

On whether he will up his lending rates, Misra said, "a decision to pass on the rate hike will depend on how the overall economic situation evolves. We may see a lag effect in the transmission of today's rate hike."

Another public sector lender Indian Overseas Bank Chairman and Managing Director M Narendra told PTI that, "I believe banks would wait till the month-end before taking a call on an interest rate hike,".