Bank interest rates to increase
By Neelima Shankar
Jun 14, 2008
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With the RBI increasing the repo rate, it is known that the interest rates to be charged by banks will increase. The debate has now shifted to the timing of that hike by the banks. This hike of the repo rate is supposed to affect all type of loans, from personal to home to even car loans. This is why the whole country’s attention has been fixed on the decisions to be taken by banks and the top bankers in the country who are busy reviewing the repo rate hike and its affect on the loans to be given out by their bank.

Bankers feel that a PLR hike might not be necessary immediately but they are assessing the situation and hence, cannot rule it out. Prime lending rate (PLR) is the interest rate that commercial banks charge their most credit-worthy customers. There is also an understanding that if RBI makes another move in July, it’s a certainty that the EMI's will go up.

Referring to ICICI Bank’s stand on the issue, K V Kamath, MD & CEO - ICICI Bank, said that, "Liquidity situation is comfortable right now. We are assessing the situation and will take a call."

The country's largest lender State Bank of India (SBI) will also announce its decision within 24 hours but they maintain that it would not be at the cost of upsetting its PLR customers. SBI might try to structure the hike in a way that PLR linked products are not impacted. But there is a unanimous consensus for the hardening of interest rate over the next year.

Naina Lal Kidwai, CEO & MD of HSBC India added, "I've maintained that it’s a flat to up as far as interest rates are concerned. I mean they are certainly not going down."

One thing is for sure that the hardening rates surely mean bad news for the consumers as the consumer loans will become costlier. However, the banks’ stand on corporate loans is still to be seen. The consequences of an increase in repo rate on investment, is something the banks need to take a call on.

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