Bankers say lending rates hike inevitable

July 30th, 2008 - 6:33 pm ICT by IANS  

Mumbai, July 30 (IANS) A day after the Reserve Bank of India (RBI) increased cash reserve ratio and repo rates Tuesday, banks said they too would hike their prime lending rates (PLR). Bank of India chairman and managing director T.S. Narayanasami said banks would look at revising interest rates. “We expect an increase of minimum 50 basis points of prime lending rates (PLR),” he said.

This, however, would be done after the RBI’s new rates come into effect Aug 30, Narayanasami said.

Punjab National Bank chairman and managing director K.C. Chakrabarty said bankers would pass on the burden to customers. “I expect a raise in interest rates in coming weeks,” he said.

According to data obtained from the Indian Banks Association, the PLR for state-owned banks vary from 12.75 to 13.25 percent and over 14 percent for private banks.

The largest private player, ICICI Bank, has a PLR of over 15 percent while Kotak Mahindra bank revised its interest rates earlier this month to 17.25 percent.

ICICI joint managing director Chanda Kochhar said her bank would wait and watch to assess the impact of the RBI’s measures on market rates.

“Markets tend to react conservatively when faced with such tightening policies from the central bank. So, it is not entirely surprising to find the interest rate structure of the banking system going through a dynamic review and adjusting to the evolving market realities,” she said in a statement.

Echoing a similar sentiment, Bank of Baroda chairman and managing director M.D. Mallya told IANS: “It is too early to comment on a rate hike but the pressure seems inevitable. We will have to analyse this soon before taking any decision.”

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