Bankers not in a hurry to hike lending rates

Bankers said on Friday that they were not in a hurry to take the RBI’s cue and raise lending rates after the central bank hiked key policy rate to tame prices as macroeconomic managers grappled for options to contain inflation without upsetting broader growth.

Bankers said on Friday that they were not in a hurry to take the RBI’s cue and raise lending rates after the central bank hiked key policy rate to tame prices as macroeconomic managers grappled for options to contain inflation without upsetting broader growth. But business leaders fretted the signal of a credit squeeze might affect expansion plans.

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Banks, however, said they would not increase lending rates immediately and would rather wait for a clearer signal on July 27, when the central bank presents the quarterly review of the monetary policy.

“We may see more policy action on July 27 and I don't see interest rates getting impacted till then,” said O.P. Bhatt chairman of State Bank of India, the country’s largest lender.

As inflation rate galloped into double digits (it was 10.16 per cent in May) an interest rate hike was widely expected

Food prices which have remained firm for most part of the last few months, have spread into core inflation, or prices of goods other than food and fuel.

The government said the hike in rates were on expected lines.

“It shows that the RBI is concerned about the inflation,” said chief economic advisory Kaushik Basu

“Any instability at this stage could derail the economy from the growth path,” said Amit Mitra, secretary general of industry chamber Ficci.