The Hindu Business Line : Old private banks may revisit rates

Normally, the chief executive of these smaller banks, when asked to react to the Reserve Bank of India’s credit policy or an announcement such as the one made on Thursday – a 50 bps hike in the CRR – would say ‘we will wait for the biggies to take the lead’.

Departing from this routine reply, the CEOs seemed to say ‘we will have to take a look at the portfolios and take appropriate steps’.

Mr N. Kamakodi, Executive Director, City Union Bank, felt that the 50 basis point hike was slightly more than expected. “We expected a 0.25 per cent hike. Last week the inflation touched an all time high, but that has come down marginally this week’, he reasoned to the higher than expected hike.

Stating that this would slightly hit the margins of the industry as a whole, Mr Kamakodi said that banks would be compelled to take a balancing step by increasing their rates if it continues for more than one quarter.

Mr P. T. Kuppuswamy, Chairman, Karur Vysya Bank said banks would be forced to increase the rates here and there, though not at one go or immediately.

“KVB will, however, look into this on Monday. There may be some more measures and we cannot take drastic steps immediately,’ he said in reply to a question.

Mr K.V. S. Manian, Group Head (Retail Liabilities and Branch Banking), Kotak Mahindra Bank, said “the CRR hike would definitely have cost implication from the bank’s perspective. It might put upward pressure on interest rates.”

Mr P. S. Prasad, CEO, Dhanalakshmi Bank, said the hike is an appropriate tool to check inflation. ’Banks will have to live with it.’

Asked if he proposed to revise the rates, he said ‘we have to look at the portfolios and work appropriately before taking a decision.’

Dr V.A. Joseph, Chairman, South Indian Bank, while stating that the hike was on expected lines said any decision on a revision in the interest rate would be taken only after April 29 (after RBI’s credit policy announcement).

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