Bankers, on Tuesday, said they would wait to see the trend in inflation and deposit fronts before taking a call on hiking lending rates after the RBI’s money tightening move in its policy review.
SBI Chairperson Arundhati Bhattacharya said the bank management was planning to meet in the evening to take a call on both lending and deposit rate hikes.
When asked if banks don’t pass on rate hikes how will the objective of monetary transmission happen, she said it would only happen when it was actually affecting the cost of funds.
“You have to look at inflation and what we are having to pay our depositors. On one side, depositors have to be given some return that makes some sense and on the other side we cannot give so much of return that our borrowers are unable to bear the pressure of rates. So, it is a call we have to take in the overall context,” she said.
“You should really watch the trend in inflation and in deposits which really impact our cost of funds, and therefore the lending rates. So, you cannot say something very quickly till we actually see what we need to do on the deposit rates as well,” ICICI Bank Managing Director Chanda Kochhar told reporters.
K. R. Kamath, CMD, PNB said bankers were keeping things open but would wait and watch how forces in the market reacted. “The point is that at what end we have pressure on interest rates on asset side, because of the stress what we are seeing in the asset side, should you increase the stress by increasing the interest rate,” he said.
Federal Bank chief Shyam Srinivasan said though the rate hike was surprising, the current inflation readings had left it with not many choices. Shailendra Bhandari, MD, ING Vysya Bank said, “policy rates have been hiked as necessitated by an inflation targeting stance, periodicity of policy review has moved to a bi-monthly cycle going forward.’’