RBI hike: No loan effect, yet
If you have an outstanding home loan, car loan or personal loan, you can breathe a little easy, for now. Although the Reserve Bank of India raised key policy rates on Tuesday in a bid to control rising prices, banks have ruled out immediate hikes in lending and deposit rates. However, in the medium term — which is three to four months — all these rates are expected to go up as the economy grows and credit growth picks up.
The RBI on Tuesday hiked the repo and reverse repo rates — the rates at which banks borrow money from it and vice versa — by a quarter per cent and a half per cent respectively. This is the fourth such hike by the RBI in 2010. Higher rates are a part of the RBI’s monetary policy to control rising prices. In its latest credit policy, the RBI has clearly identified rising prices as the biggest worry. Economic growth is no longer a concern for the Central Bank now, which has revised upward the FY11 GDP growth forecast to 8.5 per cent. Explaining the apex bank’s worries, RBI governor D. Subbarao said the new factor in the inflationary content were demand side pressures which were clearly evident.
However, bankers are likely to take the latest hike in their stride, as they have the three earlier changes. Interest rates will increase only as the demand for credit increases. “I don’t think any bank would take the decision to hike. Every bank is going to absorb what has happened today,” said Mr O.P. Bhatt, chairman, State Bank of India. Canara Bank chairman and managing director A.C. Mahajan said, “I don’t see interest rates going up before October.”
Post new comment