Reiterating that a hike in the interest rates is unavoidable, the Chairman and Managing Director (CMD) of United Bank of India, P K Gupta, said that the banks might have to go in for a hike on interest rates even before the monetary policy scheduled next month. However, he also specified that it would be too early to specify the exact amount of the increase as also the time frame. The quantum of increase will be decided after assessing the situation and the need of the individual banks, he added.

HDFC Bank MD Keki Mistry explained that if the cost of funding is raised (repo rate), the bank would definitely pass it on to the borrowers. This is the emphasis of the RBI move, to curtail the demand of the consumers. Mistry, the MD of the second largest private sector lender in India, added that, "I expect no further action from RBI immediately." Last week, HDFC Bank had raised its prime lending rate, due to the June 11 announcement of RBI hiking the repo rate by 0.5%.

India is under an inflationary situation last experienced more than a decade back. The reason for this double hike by the RBI is to check the rise in demand of consumers, which is further making inflation a menace. The central bank’s aim is to reduce the money supply in the economy, so as to get the economy on track. For that reason, the RBI had announced hiking its short-term lending rate to banks and their mandatory cash reserve by 50 basis points each with an aim to suck up an estimated Rs. 15,000-20,000 crore of liquidity.