Top banks not to take hasty decision on rates post repo hike

[K.Karthik Raja]

Top banks not to take hasty decision on rates post repo hike
Thursday, Jun 12

MUMBAI - The country's two largest banks did not hint at any
strong measures like hiking prime lending rate that could be taken
after Reserve Bank of India's repo rate hike.
On Wednesday, RBI hiked repo rate by 25 basis points to 8.00% from
7.75%.
"We can't have a knee-jerk reaction (to the repo rate hike),"
State Bank of India Chairman O.P. Bhatt said today.
The country's largest bank will meet Friday to examine the impact
of the repo rate hike on its lending and deposit rates.
"Yesterday (Wednesday) also I said the same thing. Maybe a little
rationalisation of interest rates or maybe we need to raise PLR. The
rate of growth (credit) actually this year has not been bad compared
to last year so far," Bhatt said.
Banks have been able to manage the pressure on liquidity, interest
rates, net interest margin by better efficiency, changing product mix,
and reducing transaction costs, Bhatt said.
"Whether we can do more of this is what remains to be seen. This
is a huge challenge for the banking industry. How to become more
efficient, how not to pass on increasing cost...will have to be seen,"
Bhatt said.
ICICI Bank, the country's second largest lender, also hinted at
not taking any hasty decision towards interest rate hike.
"Liquidity is comfortable. We will have to wait and watch how the
market reacts. Bond market has already reacted. We have to see deposit
and borrowing rates," ICICI Bank Managing Director and Chief Executive
Officer K.V. Kamath said.
Kamath asserted that there was no slowdown in corporate lending
and the investment pipeline remains strong even after the repo rate
hike.
He also said that there was no risk of higher slippages going
ahead.
The bank heads were speaking on the sidelines of a seminar on
financial sector reforms organised by SBI.
The other major lender, Housing Development Finance Corp, however,
indicated that they may have to increase their home loan rates.
"We will review our lending rate at the end of the month. There is
upward pressure on interest rates. We will see how liquidity remains
and how short-term rates behave," HDFC Chairman Deepak Parekh said.
Banks will have to protect their margins, and spreads. If margins
are
eroded, we will have to do something, Parekh said. End