Unlikely to hike lending, deposit rates immediately

Mumbai: Indicating that banks would not be in a tearing hurry to jack-up their interest rates following the Reserve Bank of India hiking its key short-term rates by 0.25 per cent each on Tuesday, bankers said they felt that the move does not warrant any immediate action on their part.

"Immediately after a rate hike like this, and a very small hike, it need not necessarily translate into a hike (lending and deposit rates by banks)," State Bank of India Chairman, O P Bhatt, told reporters here.

However, State Bank of India`s ALCO (Assets Liability Committee), which is expected meet shortly would take a final call on the issue, Bhatt said.

"But there is certainly an upward bias in interest rates," he said

The short-term lending (repo) rate now stands at 6.5 per cent and the borrowing (reverse repo) rate at 5.5 per cent after today`s hike aimed at controlling high inflation.

Echoing similar views, private bank ICICI also ruled out the possibility of the bank revising its deposit and lending rates immediately.

"A 0.25 per cent increase in policy rates does not immediately translate into a hike. The deposit and lending rates depend on how the cost of funds are moving and demand and supply of money. The cost of deposits is going up. So there is certainly an upward bias in interest rates," Kochhar said.

Today`s rate hikes do not immediately warrant a hike by banks in their lending and deposit rates, she added.