Though the Reserve Bank of India increased its policy lending rate for the 12th time in 18 months in its ongoing fight against inflation, most large lenders do not have immediate plans to toe the lines of the central bank in hiking their lending and deposit rates.
This is the first time in the past one year that top Indian lenders appear to be adopting a different stance and hold rates steady, despite the central bank's continued hawkishness.
Between July 2010 and August 2011, RBI raised repo rate by 250 basis points to 8%. During the same period, the State Bank of India, the country's largest lender, raised its base rate or the minimum lending rate by the same quantum to 10% from 7.50%.
"We do not see a possibility of rate hike based on this policy. But going forward, we cannot rule out another hike in rates. But, that probably will be the last hike," HDFC MD and CEO Keki Mistry told ET.
On Friday, RBI raised its key lending rate, or repo rate, by 25 basis points to 8.25%. The reverse repo rate, which is linked to the repo and 100 bps lower, is up at 7.25%.
"We do not think the banking sector will look at transmission of policy rates immediately. There is ample liquidity in the system, preventing banks from hiking deposit rates, and if we are not raising deposit rates, there is no justification to raise lending rates. Also, whatever little demand exists for loans will get affected if banks raise rates now," said Central Bank of India CMD MV Tanksale.
Canara Bank CMD S Raman said: "The trigger to raise lending rates will depend on accretion of deposits. Since credit growth has not been great, there is no pressure to raise rates. So, the rate hike may not be swift. I think we are almost at the peak."
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