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N.S. Vageesh

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Chennai Feb. 13 Funds just got more costly. Companies, big and small, will soon have to pay more for their borrowings. And home loan borrowers who are reeling from a 3 percentage point hike, spread over the last nine months, will have to brace up for one more hike.

Both the governor, Dr Y.V. Reddy and the deputy governor, Dr Rakesh Mohan, prepared the market for this. At the time of the credit policy review, a fortnight earlier, both had repeatedly emphasised that they would be ready to use "all monetary instruments" if the situation warranted.

There was a veiled warning — but no one could make out what exactly the RBI would do. As it turned out, "all" included re-using those instruments that were used just about two months ago.

This is the busiest season of the year for banks. There is already a race to mop up deposits and banks have been hiking their deposit rates.

These will get passed on to all borrowers, over a period of time. Top private banks, ICICI Bank and HDFC Bank had hiked their prime lending rates by one percentage point few days ago. It's now just a matter of days, before public sector banks follow suit.

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