Banks to study costs before rate hike action

Banks on Tuesday said they would analyse their cost of funds before any action on interest rates following RBI’s decision on Tuesday to hike key lending rates.

Banks on Tuesday said they would analyse their cost of funds before any action on interest rates following RBI’s decision on Tuesday to hike key lending rates.

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The country’s largest lender, State Bank of India, has so far decided to hold interest rates both for deposits and loans.

Banks said their respective asset liability committees (ALCO) — the nodal group of officers that analyse costs and income of lenders — would meet in the next few days to study how RBI’s decision to hike the repo rate by 0.25 percentage points would affect their cost of funds.

“You should really watch the trend in inflation and in deposits..which really impact our cost of funds, and therefore the lending rates. So, you cannot say something very quickly till we actually see what we need to do on the deposit rates as well,” Chanda Kochhar, managing director, ICICI Bank, said.

M Narendra, chairman and managing director, Indian Overseas Bank too said that a decision on lending rates would be taken after the bank’s ALCO met. “We would have to do a full analysis on the cost of funds, but at this point I cannot say which would be those ones,” he added.