Lending rates for banks are likely to go up, but the timing is yet to be decided, according to top bankers.
“The direction of lending rates is an upward bias,” Mr Albert Tauro, Chairman and Managing Director, Vijaya Bank, told Business Line.
A Syndicate Bank official said that if cost of funds goes up, then probably lending rates will also go up. “If there is an equity constraint in the market, then cost of funds may go up. But we cannot rule out hiking of lending rates in the future,” he added.
On the other hand, though most banks have increased their deposit rates already, they are not likely to take a re-look at the deposit rates for now. But bankers point out that despite that deposit demand is not growing as much as credit growth.
“If credit growth is aggressive, then we will have to shore up our deposit rates. But if it is not aggressive, we will have to wait and watch,” said Mr Tauro.
But in the rising interest rate scenario, bankers feel that it will be a little difficult for banks to make money from the government securities portfolio. “In the last couple of quarters, banks have not made too much money from treasury investments. This quarter too, earnings from treasury will remain muted,” pointed out Mr Tauro.
The Syndicate Bank official also added that this year there has been hardly any provisioning by banks on this front. And since the market had already discounted this rate hike, he explained that the impact on the G-Sec segment will be comparatively less.
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