Banks to raise rates after RBI hikes key rates

Even as the Reserve Bank of India (RBI) raised its key rates?repo and reverse repo rates?by 25 basis points while unveiling its mid quarter monetray policy to curb the high inflation, banks are gearing up to hike their lending and deposit rates.

Some public sector banks that are likely to increase their interest rates soon include Canara Bank, Indian Overseas Bank and Corporation Bank.

S Raman, CMD, Canara Bank, said that the bank may increase its base rate by 25 basis points when its assets and liability committee (ALCO) meets next week.

Ramnath Pradeep, CMD, Corporation Bank also said that the bank is also likely to increase its lending rates by 25 basis points as the bank which had remained aggressively in increasing its advances wants protect its margin. However, Pradeep made it clear that the bank is not in a mood to increase its deposit rates.

The state-owned lender IDBI Bank, which had ALCO meet on Saturday, decided to increase its deposit rates by up to 50 basis points (bps), effective from June 21.

IDBI bank has increased its deposit rates by 10 bps to 8.25% for a maturity period between six months to 269 days and by 50 bps to 9% for maturity period between 270 days to one year.

RK Bansal, executive director, IDBI Bank said that the bank has increased its deposit rates by 25 bps to 9.25% for maturity period between 266 days and 499 days. Bansal said, ?We have done this only to make our deposit rates in these buckets attractive and keep them in alignment with the 500 days deposit rates, which is offering 9.5% and contributes for 90% of deposits for the bank.”

M Narendra, CMD, Indian Overseas Bank, said that bank is waiting for its ALCO meet to decide the rates. Narendra hinted that the rates may go up by 25 bps. He also indicated that the bank may also increase its short-term deposits.

DL Rawal, CMD, Dena Bank, said that the bank may take a call on its rates somewhere during next month only.

However Bhaskar Sen, CMD, United Bank of India, said that there is no reason to hike our interest rates. ?As we have increased our base rates by 50 bps in recent past, we are not much adversely affected by the hke in key policy rates, added Sen.

IDBI bank has restructured its education loan in which it currently charges interest rates in the range of 12.25% to 12.75%.

?We will be offering concession by 25 bps in education loan to the boys hailing from SC/ST and minority communities and by 50 bps to the girls hailing from these communities, effective from Tuesday, ”said Bansal.

Rupa Rege Nitsure, chief economist, Bank of Baroda, said that being slack season there is no pressure on liquidity. ?There is no reason enough to raise our interest rates. The rates may go up only when the farm credit picks up,” added Nitsure.

Mohan Tanksale, ED, Punjab National Bank also said that at the moment the bank is not looking at any revision in its rates. ?We are not the borrowers from RBI as of now,? added Tanksale.

SC Sinha, Ed, Oriental Bank of Commerce, said that the bank is not in favour of rate hike. ?Utilisation of fund important for us in the time of slack credit pick up season,? he added.