Home,auto interest rates not to go up immediately, say bankers

Mumbai, Nov 2 (PTI) Cost of home, auto and corporate
loans may not go up immediately, even though the Reserve Bank
of India on Tuesday raised short-term key policy rates by 25
basis points to check high inflation, bankers said.
"The transmission mechanism between RBI and rest of the
financial system does not work very fast. It always works with
a time lag," said the State Bank of India Chairman O P Bhatt.
"So, whether it (hike by RBI) will raise pressure on
the system. Eventually, it will. Whether there would be
immediate reaction. Not likely," he said
"There would be some banks who would be thinking of
raising rates, it would be kicker for them. For other banks it
may not be so. So there would be mixed reaction," he added.
RBI today hiked its key short-term lending and borrowing
rates by 25 basis points (0.25 per cent) each with immediate
effect, in view of high inflation.
Accordingly, the short term lending (repo) rate stands
at 6.25 per cent, and the borrowing (reverse repo) rate at
5.25 per cent.
Indian Bank Executive Director V Ramagopal said banks
have already factored in the RBI.
So, there would not be immediate impact of this on the
interest rates, he said.
However, if credit offtake picks up and liquidity
tightens further, it would certainly lead to higher interest
rates, Ramagopal added.
Echoing similar view, Oriental Bank of Commerce
Executive Director S C Sinha said, "I don't think there would
be increase in interest rates as RBI move was already
discounted."
Going forward, interest rate would depend on liquidity
situation, Sinha said, adding, RBI is doing its bit to ease
liquidity and the position will further improve with
government spending and Coal India money coming into system in
days to come.
IDBI Bank executive director Sushil Munhot interest
rate would remain static for now. Credit growth in the coming
days would decide the future course of action by banks.
Some bankers feel that many lenders have already
raised rates. So, even if there is little increase, it would
be on case to case basis.
RBI rate hike would not have impact on the base rate.
However, Benchmark Prime Lending Rate (BPLR) would come in for
a re-look, leading to revision in the portfolio linked to
BPLR, Bank of Baroda Executive Director RK Bakshi said.
The base rate revision by banks are due in January
next year. PTI DP
PRI


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