Bank, UTI Bank and foreign banks are looking at hiking bank deposit rates
as well as rates on loans by 25-50bps while public sector banks are keenly
watching the developments as finance minister P Chidambaram has indicated
that he does not favor a rate hike.
bankers say the recent hike in the reverse repo rate would lead to a rise
in the cost of funds of banks leading to a rise in loan rates for both the
retail and corporate segments.
say the lending rate hike can take place even without raising the prime
lending rate (PLR). In other words, banks will decrease the spread for sub-PLR
loans. The PLR is the rate at which prime bank customers can borrow money.
But all large borrowers with good credentials borrow at rates below the
HDFC Bank officials said, "We are likely to increase both deposit rates
and rates on retail loans as well as on corporate loans by 25-50 basis points."
HDFC Bank's asset-liability committee will meet next week to take a decision
on interest rates.
officials from private and public banks are keenly waiting and watching
the developments, as the situation is dynamic. The head of a state-owned
bank said, "A hike in deposit and lending rates is inescapable. Banks
are scheduling asset-liability committee meetings in the coming week."
public sector banks may not hike rates as of now but interest rates will
definitely go up in another couple of months he said.
the upward movement of interest rates in the last few months, home loan
rates have remained stable due to cross subsidies and stiff competition
among banks. Apart from this is the fact that the home loan portfolio comprises
a major chunk of business for banks. But despite this home loan rates did
increase by 0.25 per cent in 2004 from 7.75 per cent to 8 per cent.
said banks would possibly launch home loan products, which would be a combination
of fixed and floating rates as it does not
seem possible to have fixed interest rates for the long term, covering a
period of 20 years as in the case of housing loans.