Unlikely to hike lending, deposit rates immediately: Bankers

Mumbai, Jan 25 (PTI) Indicating that lenders would not bein a tearing hurry to jack up their interest rates followingRBI hiking key short-term rates by 25 basis points, bankerstoday said the move does not warrant any immediate action ontheir part.

"Immediately after a rate hike like this, and a verysmall hike, it need not necessarily translate into a hike(lending and deposit rates by banks)," State Bank of IndiaChairman O P Bhatt told reporters here.

However, SBI''s Assets Liability Committee, which isexpected to meet shortly, would take a final call on theissue, Bhatt said. "But there is certainly an upward bias ininterest rates," he said.

The short-term lending (repo) rate now stands at 6.50 percent and the borrowing (reverse repo) rate at 5.50 per centafter today''s hike aimed at controlling high inflation.

Private lender ICICI Bank also ruled out the possibilityof revising its deposit and lending rates immediately.

"A 0.25 per cent increase in policy rates does notimmediately translate into a hike. The deposit and lendingrates depend on how the cost of funds is moving and demandand supply of money. The cost of deposits is going up. Sothere is certainly an upward bias in interest rates," ICICIBank managing director and CEO Chanda Kochhar said.

Today''s rate hikes do not immediately warrant a raise bybanks in their lending and deposit rates, she added.

Union Bank of India Executive Director S C Kalia alsosaid that the policy rate hike is a signal of rising interestrates, but banks will not rush to hike their rates. "Therewould not be an immediate hike, but there is upward bias oninterest rates."

Oriental Bank of Commerce Executive Director S C Sinhasaid that the policy rate hikes will not result in animmediate increase in lending and borrowing rates of banks asthis was already factored in by the market, given highinflationary pressures.

Responding to a question on RBI''s warning to banks tomoderate credit growth in line with the Central Bank''sprojections, state-run Union Bank of India''s CMD M V Nair saidthat there were some discomfort (in RBI) when incrementalcredit-deposit ratio is over 100 per cent.

"They have not given any number, but there is definitelya discomfort when incremental credit-deposit ratio is over 100per cent," Nair said.

The RBI has warned banks to moderate credit growth to itsprojection of 20 per cent for FY 11 from the current rate of24 per cent or in other terms reduce the gap between creditand deposit growth. MORE IAS JJ