Loans all set to get dearer now
By Vaibhav Aggarwal
May 4, 2011
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The annual monetary policy released by regulator, Reserve Bank of India for this fiscal has brought about a 50 bps rise in the policy rates.
With this rise, bankers say that lending rates are also set to get dearer in the range of 50-100 bps.

Any subsequent hike in deposit rates is not expected to be on the cards as of now, as banks have already raised deposit rates to a large extent in the recent past.

According to CMD of ICICI Bank, Ms Chanda Kochhar, a rate hike is expected from the nest of banks as any previous response to the earlier policy rates had not been taken on a full scale.

"A large part of the increase (RBI hiking key short-term rates) will have to be passed on in the form of increase in lending rates, as most banks will try to maintain margins. The impact could be 50-100 basis points. It will depend on how much banks have already passed on," she said.

A similar view is also placed by CMD of HDFC Bank, Mr Aditya Puri. "Auto and home loan EMIs will go up. But I don't know when and by how much each one will go up,'' he said.

Speaking about the take on deposit rates, CMD of Punjab National Bank, Mr K R Kamath said, "We are entering the so-called ‘off season'. If there is no credit pick-up immediately and if there is no reason to go for unduly higher deposit growth, deposit rates may not go up immediately. The lending and deposit rate hikes need not necessarily go together."


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