Union Bank sees hike in lending rates

The possibility of Reserve Bank of India hiking interest rate, will lead to hike in lending rates, a top banker said in Mumbai.

The possibility of Reserve Bank of India (RBI) hiking interest rate, will lead to hike in lending rates, a top banker said in Mumbai.

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"There is a strong possibility of the Reserve Bank hiking interest rates at its policy review, as inflation is still very high. If liquidity doesn't improve and policy rates move up, then deposit rates and lending rates too goes up," Union Bank of India's CMD M V Nair told reporters on the sidelines of a press meet in Mumbai.

There are indications that if policy rates moves up, there is a possibility that it will get transmitted to credit market, Nair said.

There is a clear bias for the policy rates to move up for the reason that inflation is still very high and inflationary expectation is to be contained, he said.

Inflation is currently in double digits, led by high food prices. For the month of June, it stood at 10.55 per cent.

On the performance of Union Bank, Nair said, the operating profit for the Q1 FY 11 grew by 32.53 per cent to Rs 1,043 crore as against Rs 787 crore in the corresponding quarter of the previous year. Operating profits for Q1 have grown at CAGR of 25.75 per cent in the last three years.