With inflation touching 11.5% on Friday, bankers are now expecting stringent monetary measures to be taken by the Reserve Bank of India (RBI) to check the rapidly rising inflation. Banks, which were on wait- and-watch mode after the central bank hiked the repo rate by 25 basis points recently, are now gearing up to effect deposit and lending rate hikes.
TS Narayanasami, chairman and managing director, Bank of India says, ?We do expect CRR hike upto 25 basis points was possible even before the policy announcement and I don?t rule out further 25 basis point hike in CRR at the time of policy announcement if the intensity remains the same during the policy announcement time.? ?Looking at the way inflation was moving, CRR and repo rate hike are desirable to move at the same rate. But I think that the reverse repo has no role to play at a time when the liquidity was tightening,?? he said.?In my bank?s case, we will have to wait and see. Borrowings have not been so much at the banking level,? he said.
Yogesh Agarwal, chairman & managing director, IDBI Bank said,?We expect some more tightening measures from RBI. Everyone is talking about a CRR hike. But I think repo rate hike is a much more direct signal than CRR hike. CRR is an indirect signal. RBI has already taken the decision to hike repo rate. I think another 25 bps (repo rate hike) may come as they (RBI) have already started taking rate action. We were the only bank who did not cut the lending rates. So, we may not hike our PLR (prime lending rate), while other banks may have to take some decision if there is further tightening.?
RS Reddy, executive director, Union Bank of India (UBI) said,?Ultimately it all depends on the liquidity and my capacity to keep my margins intact. Hence, we are waiting from the signal coming from the RBI. We can go for any interest rate hike only when our credit offtake was strong. Bank?s ALCO will be meeting on Monday to review the situation.
Banks will have to closely watch the movements in the financial markets like call rates, G-Sec prices.