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This is with reference to "SBI hikes lending rates by 50 basis points" (Business Line, December 27). When the Reserve Bank of India (RBI) raised the cash reserve ratio by 0.50 per cent, the natural consequence was that banks would raise the prime lending rate (PLR) by a certain value as the amounts lying without earning interest could impact severely on the banks' profitability.

The result of the rise in PLR is bound to impact investment in industry. This may lead to a growth in market borrowing by corporates and the capital market becoming more active. A possible negative outcome could be a reduction in interest rates of term deposits by banks, which could affect the social security side. It is hoped the RBI will not let this happen.

T. R. Anandan

Coimbatore

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