Market was prepared for hike, says Karnataka Bank chief

The market was prepared for a 25 basis points hike in repo rate in the mid-quarter policy review by RBI, according to Mr P. Jayarama Bhat, Managing Director and Chief Executive Officer of Karnataka Bank Ltd.

Mr Bhat told Business Line here on Friday that although some volatility is expected in the near term, market in general would be neutral, as it had already factored in this move by RBI.

Asked if the banks would pass on the hike to the customers, he said not many banks passed on the burden of 50 bps hike in the last review. “Lending rates are already high, still banks may have no option but to pass it on to the customers this time,” he said.

When told that there are signs of slowdown in the domestic sector and a hike in lending rate hike is likely to hasten the slowdown process, he said slowdown is not the focus in hiking repo rates. Focus is on containing inflation. It has to be contained. Policy action may result to slowdown the growth in economy, he said.

Mr Bhat said he expected GDP growth below 8 per cent for the next two-three quarters. “We expect the growth to be around 7.7 per cent during the current fiscal,” he said.

Stating that another rate hike seems possible in the next review, he said: "We will have to wait and watch as inflation still remains a concern."

All efforts to control inflation are on monetary side, he said, adding that there are not much efforts from the fiscal side.

COMMENT NOW