IBA, on Sunday said interest rates have to go up sooner than later as there is a decline in the growth of deposits, even as Finance Minister Pranab Mukherjee expressed confidence that banks will not revise upwards their lending rates soon.
Indian Banks Association Deputy Chief Executive Officer, K Unnikrishnan, said though the tight liquidity situation of the past two months has been eased to a large extent, there has been almost a two per centage points decline in the growth of deposits in the industry as a whole.
The dip has been more pronounced since the Reserve Bank increased the short-term lending (repo) and borrowing (reverse repo) rates by 25 and 50 basis points last month, he pointed out.
"The rate of growth of deposits has been coming down by one to two per cent to around 17 per cent in recent weeks from 19 per cent this time last year," Unnikrishnan told PTI here.
He further said since RBI had hiked the repo and reverse repo rates last month-end, many bankers increased their deposit rates. Therefore, it is natural that the higher cost of deposits is aligned to their lending rates, he said, adding from the beginning of October banks will have to increase their lending rates.
Unnikrishnan said most banks have not revised base rates so far as the new benchmark lending rate can be revised on a quarterly basis only. However, he does not see a major jack-up either in the lending or deposit rates saying, the revision will be to the tune of 25-50 bps only.
Speaking to newsmen in New Delhi after a meeting with bankers yesterday, Mukherjee had exuded confidence that banks would not raise their interest rates following the tight monetary policy of the central bank.
"No I don't think so. The banks are fully aware of it and they have taken note of it and they have adjusted their plans accordingly," Mukherjee had told reporters in response to a query whether the tight monetary policy would impact the interest rate regime.
However, SBI Chairman O P Bhatt had told media after meeting the Finance Minister that "I think there is an upward bias (on interest rates) that will take place."
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