NTH :: RBI hikes repo rate, home loan EMIs set to rise

NDTV | Updated On: January 28, 2014 18:43 (IST)


In an unexpected move, the Reserve Bank of India (RBI) hiked its repo rate, or its main lending rate, by 0.25 per cent to 8 per cent. Banks are expected to hike their lending rates after the RBI’s surprise move but not immediately.

KVS Manian, president of consumer banking of Kotak Mahindra Bank, said over a period of time the RBI rate hike will transmit into deposit and lending rates. But as loan growth remains weak for banks, the lending rate hikes are likely to be muted, he said.

The RBI however said if consumer price inflation eases as projected it does not foresee further near-term tightening.

Abraham Chacko, executive director of Federal Bank, the RBI’s move is aimed at controlling core inflation and “I don’t think banks would worry too much about 25 bps hike and immediately hike rates.”

At Federal Bank, “we will wait and watch” and see how the credit offtake pans out before deciding on lending rates, he added.

Arundhati Bhattacharya, the chief of State Bank of India, the country’s largest lender, after the RBI’s repo rate hike there would be some increase in cost of funds but we have to also see that borrowers don’t suffer. We will decide on lending rates after taking into account the cost of funds, she added.

Shikha Sharma, CEO of Axis Bank, said decision on hiking lending rates would be a bank-specific decision based on their cost of funds.

Other prominent bankers said they will wait to see the trend in inflation and deposit fronts before taking a call on hiking lending rates.

“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.

HDFC Bank’s CEO Aditya Puri said “rate hike is a function of what happens to deposit cost and the demand for credit.” (With Agency Inputs)

Source : http://goo.gl/Eptrbg

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