Rise in home and auto loan rates unlikely in the near term
By Joseph Samson
Apr 21, 2010
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Despite an increase in the policy rates by the RBI in its credit policy review for the year 2010-11, it is unlikely that home and auto loan rates would surge immedialtely. This comes as a breather for the common man. Yesterday, the RBI raised the key rates by furhter 25 basis points.

While bankers said that interest rates would not surge in the near term but they agreed that this fiscal is going to witness a rise in interest rates somewhere in the future.

Ms Chanda Kochhar, CEO, ICICI Bank, said, "With a gradual increase in CRR, excess liquidity is being taken out of the system. So clearly during the year, interest rates will go up. But I do not see an immediate rise in interest rates. It could happen as credit demand picks up, which will be more from the second quarter."

Mr O.P Bhatt, Chairman, State Bank of India, said: "There is an upward bias on lending rates since January, which will become stronger now. But if you raise lending rates now, you will price yourself out of the market in some of the products that you sell."

As a reaction to the monetary policy, HDFC vice-chairman and chief executive officer Keki Mistry said: "I don't believe that there would be a change in rates as of now for all our normal products. On our new products, we will take a call on the last day."

"No changes in rates for now. It will all depend on credit offtake," said TY Prabhu, CMD of Oriental Bank of Commerce.

"We are not going to hike rates immediately. A quarter per cent hike does not warrant an increase in the lending or deposit rates. Also, since it is a lean season, we may not require deposits in a big way. We will take a call on April 30 on the rates," pointed out Canara Bank CMD AC Mahajan.

"As of now, we (banks) do not have pricing power.... there is so much liquidity in the system," Bank of Baroda executive director RK Bakshi said.

"We don't see a strong signal to raise interest rate immediately. We are in a pause mode. The demand-supply situation may get banks to move rates. There is no policy statement which would force banks to change rates," Romesh Sobti, MD and CEO of IndusInd Bank quoted.


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