Bankers expect to hike their lending rates on the back of an expected rise in interest rates by the Reserve Bank of India. Bank chiefs told reporters after a scheduled meeting with the RBI on Monday ahead of its credit policy due on April 20, their margins are already under pressure and a rate hike would be difficult to swallow.
?If the RBI hikes the CRR (the cash banks have to compulsorily keep aside from lending) further in the annual policy, then lending rates could rise as costs for the banks would go up,? said MV Nair, chairman & managing director of Union Bank of India. He said bank margins are already under pressure because of the new system of daily calculation of rates on savings deposits. Nair is also the chairman of the Indian Banks Association, the apex body of banks.
Banks also told governor D Subbarao that they expect a credit growth of 20-22% across the segments, which could push up inflation. The RBI would have to step in with monetary policy tools to stem such inflationary pressures. M Venugopalan, managing director and CEO, Federal Bank, said credit growth in the industry, which has started to pick up, would improve further by the second quarter of this fiscal.
Bankers expect the RBI to raise CRR by 75 basis points to 5.75% on April 20. The central bank has already begun exiting the easy money policy in March, raising repo and reverse repo rates (rates at which banks borrow and lend with RBI) by 25 basis points each.
