Mumbai: Home, retail and other loans are likely to cost more with RBI raising the Cash Reserve Ratio (CRR) by 0.5 per cent in a surprise move on Friday night to suck out excess liquidity to contain inflation.
Bankers, who were non-committal over the quantum of the hike in interest rates, however, said there would certainly be some repricing of various loans following the increase in CRR to 5.5 per cent in two stages.
Individual banks will have to take their own calls depending on their available resources and requirements, they said, after the RBI move aimed at absorbing a substantial Rs 13,500 crore from the banking system to contain inflation with signs of overheating of the economy.
"Cost of funds and deposits are likely to go up and this will have its own effect on lending rates, Oriental Bank of Commerce Chairman, K N Prithviraj, said at the CRR hike effected by RBI after almost two years.
State Bank of India Managing Director, T S Bhattacharya, however, maintained that the hike in CRR would not necessarily have a major impact on the largest bank of the country.
As per very rough estimates, Bhattacharya put the total hit in the range of Rs 180-200 crore for SBI, which, he feels does not necessarily warrant a policy response from the public sector banking major.
"But the concern remains on the rising cost of deposits and the need for long term capital," he said.
While pointing out that resources would be a cause of concern for banking system as a whole, M D Mallya, Chairman and Managing Director, Bank of Maharashtra, said repricing of loans would most likely take place in the industry.
On his bank, Mallya said that any decison of raising interest rates will be taken by the bank's Asset-Liability Committee (ALCO) which is expected to meet next week to take a call on housing and retail loan rates.
"My bank is comfortable in terms of resources," he said.
Rana Kapoor of Yes Bank described the RBI move as having being "determined by the velocity of inflation which needed to be curtailed."
"It is a clear signal to banks that some correction is required in lending for genuine segments as opposed to speculative segments," he said.
Bank of Rajasthan (BoR) Chairman, Pravin Kumar Tayal, agreeing that there would be an upward pressure on interest rates of retail loans, said that the RBI move was "timely" given the fast pace of growth.
"The pressure on interest rates is for almost every bank," he said, adding that the industry could expect similar steps in the forthcoming quarterly review of its annual credit policy by the Reserve Bank in January.
Kotak Mahindra Bank's Treasurer, Mohan Shenoi, said that "the CRR hike would definitely impact liquidity in the system, which would experience a large capital outflow in the form of advance tax and through government auctions."
Expressing the view that inflows in the form of Government spending and about Rs 10,000 crore as interest on special deposits along with FII inflows could neutralise the CRR hike impact, Shenoi said that, "till the Government spending begins, however, short term interest rates upto six months could be under pressure."
For the bank, Shenoi felt, the hit would be in the range of Rs 50-60 crore, which will not have a major impact.
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