The exact quantum of increase of deposit rates in view of different timeframe was being worket out. The RBI had in its review of Credit Policy on Tuesday, July 29 given signals for a tight money policy, hiking repo rate by 50 bps and CRR by 0.25 per cent, the latter by August 30. Analysts predict this will lead to an all-round increase in lending rate.
Mr Chakrabarty said RBI Governor Y V Reddy has given a clear signal to the banks that to rein in inflation will be the top priority of monetary management.
The decision to hike PLR and deposit rates was taken by the Board of Directors of the PNB in the morning.
So far Oriental Bank of Commerce, a mid-sized public sector bank, has announced a hike in its benchmark lending rate by 0.50 per cent from July 15.
Mr Chakrabarty said the new deposit rates and lending rates will come into effect from August 1, 2008.
He said that hiking the CRR will put pressure on its margins and Bank was left with no other option but to increase the lending rates.
He, however, felt that there will be no impact on the credit offtake due to hiking of lending rates.
Mr Chakrabarty was categorical that the lower volume of credit growth envisaged by the Central Bank would not affect loans to the productive sectors.