Bankers see interest rate hike

Leading banks like State Bank of India are now "examining" whether the current trend warrants hike in lending and deposit rates.

"After RBI raised the repo and reverse repo rates by 0.25 per cent each, there is definitely an upward pressure on short term rates," A K Purwar, chairman, SBI said on the sidelines of a Saarc business conclave organised by Ficci on Thursday.

The country's leading commercial bank will soon take a decision on whether or not to raise the short term lending and deposit rates, he said.

Though repo and reverse repo rate hikes were intended to check inflation, Yes Bank CEO Rana Kapoor said, "Lending rates are likely to go up by 50-75 basis points in a few months."

"Deposit rates of some of the banks have already gone up by 25-50 basis points," he said, referring to the rise in cost of funds. Kapoor said, lending rates may start rising from first quarter of next year.

Top officials of other PSU banks like Punjab National Bank and Oriental Bank of Commerce had earlier ruled out hike in lending rates but admitted that there was an upward pressure on the overall interest rates considering the tight liquidity situation.

The RBI had kept its benchmark lending rate - bank rate - unchanged to avert an upward pressure on the overall lending rates of banks but raised the repo and reverse repo rates to 6.25 and 5.25 per cent respectively to rein in inflation within 5 to 5.5 per cent this fiscal and ensure a 7 to 7.5 per cent growth.