The Hindu Business Line : Fear of inflation has triggered hike in repo rate: Deepak Parekh

The HDFC Chairman, Mr Deepak Parekh, says one should be prepared for another quarter per cent hike in the next couple of months. He feels that the RBI is justified in hiking the repo and reverse repo rate adding that the main fear is inflation.

Excerpts from CNBC-TV18's exclusive interview with Mr Deepak Parekh:

We have had a couple of mixed reactions; bankers are saying they weren't quite expecting this?

I personally think the RBI is justified in increasing the repo and reverse repo rate. It was unexpected, sure the market players were not expecting it at this time, at this juncture, but if you notice the happenings across the world this week, particularly emerging markets, then most central banks have increased rates. The main fear is inflation. In India, inflation is going up but we are not really paying the right price for oil. If the oil price increases are passed on to the public, then the inflation would come to double-digit figures because everything could get impacted. I think the rate hike is following the global trend and the trend that is happening in the emerging markets and I do not think a quarter per cent hike in short-term rates will impact home loan rates. No home loan company borrows short-term money, they borrow medium-term and long-term.

Do you think home loan rates or for that matter PLRs (prime lending rates), corporate loan rates might go up in the next couple of months reading this signal?

I don't think we should look at it that way and I think its just caution. The RBI is telling people that you have to be careful; inflation is going up, which is a cause of worry. We don't want to get back to the 90s when inflation was in double digits, because that will slowdown economic growth and a host of other issues come with high inflation. It's more cautionary. It is only short-term rate. We have to see what the Governor does in July

Home loan rates have gone up in the past few months by about one to one and half percentage point? Have you seen any slowdown in the pace of growth of home loans and if the rate hike happens once again in July or if it is passed on, do you think there could be a further slowing?

I think the slowdown has not really happened for the actual users. The slowdown may have happened where people were investing money in real estate.

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Fear of inflation has triggered hike in repo rate: Deepak Parekh