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Bankers have welcomed the RBI decision to hike repo and reverse repo rates by 25 basis points each in the third quarter review of monetary policy for 2010-11.
Corporation Bank
Mr Ramnath Pradeep, Chairman and Managing Director of Corporation Bank, told Business Line on Wednesday that the RBI has taken the right view on increasing repo and reverse repo rates. At the same time, the RBI has allowed banks to borrow through the SLR window up to April 8. This will give enough liquidity to banks.
Asked if there will be an increase in interest rates, he said it is bound to be. “We are going to have a discussion on this issue. We will take a call after discussing with the RBI,” he said.
On the RBI's decision to keep a watch on abnormal credit growth, Mr Pradeep said credit-deposit ratio of some banks is very high. The deposit growth is around 16 per cent and credit growth is at 24 per cent. “Funding is coming through call money or LAF. It is a concern. That is going to be a problem.”
Welcoming the decision to pay attention to the abnormal credit growth, he said: “It is good for the system.”
Karnataka Bank
Mr P. Jayarama Bhat, Managing Director of Karnataka Bank Ltd, said that the 25 basis point increase in repo and reverse repo was expected. The RBI has kept one per cent window in SLR to maintain liquidity in the system. “RBI has taken a cautious view and this neutral policy is a welcome move for banks,” he said. On the interest rate scenario in the banking industry, he said that it all depends on individual banks. Banks might act depending on their liquidity position. “But as of now there may not be much correction. Recently all banks have increased their deposit interest rates in anticipation of this hike,” he added.
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