The Hindu Business Line : Banks may re-look at rates

Coimbatore/Mangalore, Oct. 30 While the CRR hike is viewed as a proactive measure by the Reserve Bank to keep the huge liquidity under check, control inflationary trend and protect the economy from being overheated, bankers say that the increase would force them to take a re-look at their interest rates.

City Union Bank, Federal Bank, Lakshmi Vilas Bank and Karur Vysya Bankmaintain that they would adopt a ‘wait and watch’ policy before taking a decision on the rates. South Indian Bank is already preparing to reduce the rate on deposits from November 1, said SIB Chairman, Dr V.A. Joseph.

The City Union Bank Chairman, Mr Balasubramanian, said the bank had only last year revised its lending rates upward twice, each time by half-a-percentage point. “We are not planning to impose any further hike for the present.”

The LVB Managing Director, Mr V.S. Reddy, said the overall impact may not be negative. “But a reduction in the bank rate during the busy season would definitely have triggered credit off-take. We will watch the trend before effecting any change in the lending/deposit rate,” he said and added that there was scope for improving certain buckets such as ALM.

The Federal Bank CEO, Mr M. Venugopalan, said the downward revision in interest rates would perhaps be put on hold. He indicated that Federal Bank had no plans to effect any change for the present.

However, measures such as permitting oil companies to hedge their forex exposures would help improve hedging.

Mr Ananthakrishna, Chairman and Chief Executive Officer of Karnataka Bank Ltd, said that half a per cent CRR hike will take some amount of the liquidity away from the market.

Asked if there will be rate hike, he said there may not be a rate hike in the present circumstances.

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