Bankers rule out rate hike

Bankers rule out rate hike

prescribing panacea: RBI Governor D Subbarao with Deputy Governors K C Chakrabarty (extreme left), Usha Thorat and Subir Gokarn briefing reporters, in Mumbai, on Tuesday. PTI

This was indicated by bankers this afternoon after their meeting with RBI Governor D Subbarao here.   Bankers were quite clear when they said that they don’t foresee any hike in the lending rates immediately.

SBI Chairman O P Bhatt pointed out that RBI’ rate action this afternoon signaled its concern on the runaway inflation, which is hovering near double-digit reflecting the ballooning food and fuel prices in the country.  

Upward bias

As such, he said: “Whatever has been done (by RBI) has reduced the supply. So definitely there is an upward bias in rates. As (credit) demand increase, there will be a demand-supply gap, then there is a possibility of interest rates going up.”

ICICI Bank Managing Director Chanda Kochhar echoed a similar view saying:  “I don’t see any immediate impact as of now, but I do see the lending rates going up during the year.”  HDFC Bank MD Aditya Puri said: “In the near term there will not be any significant increase in the rates.  Our rates will depend on demand-supply and the cost of funds.”
His bank has seen pressure building upon its margins with the cost of funds going up, according to him.  

Canara Bank CMD A C Mahajan said: “I don’t think lending rates will rise till June 30.  We will take a review of rates only after the base rate becomes effective from July 1.  Tinkering with the BPLR doesn’t make sense now as credit offtake is better than in December and January.”

Union Bank of India CMD and Indian Banks Association Chairman M V Nair said “Considering there is Rs One-lakh crore liquidity in the system now, even if RBI to suck out money through 25 basis points hike CRR, I think there will be enough liquidity in the next six months.”

Bank of Baroda Executive Director R K Bakshi said: “Its on the lower band of expected lines. Its a balanced policy. The policy is positively biased towards growth,” while Bank of India ED N Narendra said: “It is a positive in terms of market expectations. This action was expected until inflationary pressure comes down. This action will not hurt growth. It will not hurt credit growth. There may be some change in product pricing (rates).”

Norms on bankers’ pay by June-end

The RBI, on Tuesday, said it would come out with norms on salaries of CEOs of private and foreign banks by June end, in a move reminscent of the US seeking to control pay of Wall Street executives, reports PTI from Mumbai.

“It is proposed to issue comprehensive guidelines... on sound compensation practices by end-June 2010,” RBI said in its annual policy for 2010-11.

These guidelines will cover effective governance of compensation, alignment of compensation with prudent risk taking and disclosures for whole time directors and CEOs as well as risk takers of banks, it added.

Currently, the salaries of top executives in private and foreign banks are approved by the central bank after the respective bank’s board gives a go-ahead to the proposal.

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