The Hindu Business Line : ‘Deposit rates may not go up in short term’

The Reserve Bank of India’s measure of hiking the cash reserve ratio by 50 basis points might not have any immediate impact on lending or deposit rates, feel senior bankers. The CRR hike will mop up about Rs 16,000 crore from the system; banks can absorb this and may not pass it on to their customers, they said.

Ms Chanda Kochhar, Joint Managing Director and Chief Executive Officer of ICICI Bank, said: “There would be no decrease in interest rates, but there is no reason to believe they will go up. We need to look at the domestic and international liquidity situation, and a call needs to be taken based on the overall liquidity. For some time reduction in rates would come to a halt, while people would wait and watch the situation.”

“The liquidity sucked out by way of the CRR hike will be offset if the kind of capital flows we are witnessing at present continues,” said Mr Bhaskar Ghose, Managing Director of IndusInd Bank.

Mr M.V. Nair, Chairman and Managing Director of Union Bank of India, said that the bank would be impacted by Rs 30 crore following the CRR hike. However, the bank would not immediately hike or cut rates. .

Mr Sandesh Kirkire, Chief Executive Officer, Kotak Mahindra Asset Management Co Ltd, said, “The hike in the CRR clearly indicates the resolve of the RBI to manage capital flows. .”

According to Mr Shailendra Bhandari, Managing Director and Chief Executive Officer, Centurion Bank of Punjab, this move by the RBI is a liquidity mopping measure rather than one that affects interest rates. “However, with the global interest rate cycle turning and domestic interest rates appearing to have peaked, the RBI may signal lower rates when it reviews its policy in January 2008,” he said.

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