Major banks like SBI, ICICI Bank, HDFC and Union Bank of India have ruled out any immediate impact on their home loan lending rates following the increase of key rates?cash reserve ratio (CRR), reverse rate and repo rate by 25 basis points?by RBI on Tuesday.
OP Bhatt, chairman, SBI, said, ?We will not hike our home loan rates immediately.?? Keki Mistry , CEO & vice-chairman, HDFC, said the company wouldn?t change its rates in the near future. ?The 25 basis points increase in CRR would only absorb Rs 12,500 crore, so one would expect the liquidity conditions to continue to remain comfortable in the immediate period. One also does not expect any significant increase in interest rates as a result of today?s measures,?? he said. Chanda Kochhar, MD & CEO, ICICI Bank, also said the bank wouldn?t hike its home loan rates.
However, SBI and HDFC which still run their special cheaper home loan rates would review them by April-end. The special rate schemes, termed as teaser rates, are offered at a fixed rate of 8-8.25% for the first year.
D Subbaro, governor, RBI who met the bankers on Tuesday while unveiling the annual monetary & credit policy, said the bankers have told him they wouldn?t increase their rates immediately. However, Subbarao said RBI would continue to monitor the macroeconomic conditions, particularly the price situation, closely and take further action as warranted. The overall size of the government borrowing programme is still very large and can exert pressure on interest rates.
According to bankers, though the latest hikes will put pressure on their margins, they may not go for a lending rates hike immediately. ?I don?t see any direct relationship between the RBI move and bank hiking rates. There wouldn?t be any immediate hike in our lending rates. The rates will be more decided by the demand and supply factor. Currently, there is abundant liquidity in the system,?? Bhatt said, adding that he believed there was an upward bias on interest rates. Liquidity would dry up once the credit demand picks up in the current fiscal. Hence, interest rates are set to go up in future.
?The interest rate is determined by demand, supply and finally, the cost of funds. As credit picks up, we see some changes in its pricing. Our cost of fund has increased by 16 basis points, thanks to the beginning of calculation of interest on saving accounts on daily basis,?? he said.
Chanda Kochhar, managing director, ICICI Bank, said though there is an upward pressure since the CRR and key rates have been hiked, the bank wouldn?t raise rates immediately. ?RBI has assured that it would opt for exit policies from stimulus packages in a calibrated manner.When the demands for credit would go beyond supply, the rates will go up,?? she said.
Aditya Puri, MD & CEO, HDFC Bank said his bank has no immediate plans to raise rates.
?Lending rate depends upon so many things. RBI hiking rates doesn?t mean we will increase our rates. Today?s RBI move wouldn?t impact our cost of funds significantly though our margins will be under pressure,?? he said.
MV Nair, chairman, Indian Banks? Association and CMD, Union Bank said that with the implementation of the base rate, there is an upward bias on interest rate for the bank. RBI has projected M3 growth at 17.0% in 2010-11. Consistent with this, banks? aggregate deposits projected to grow by 18.0% while the growth in non-food credit is placed at 20.0%.
