Banks to decide on hiking interest rates this week-Hindustan Times 23.09.2013
Banks are likely to take a decision on raising deposit and lending rates this week after the Reserve Bank of India (RBI) hiked its key lending rate on Friday. Bankers say that tight liquidity, the hike in repo rate and a pick up in demand for loans in the coming festive season may force them to hike rates.
“Increase in repo rate (the rate at which RBI lends to banks) does not affect lending rates of banks, and especially of SBI. Deposit rates affect our lending rates,” said Pratip Chaudhuri, chairman, SBI. “However, liquidity is tight in the market and we shall have to pass additional cost of liquidity on borrowers. So, we shall first increase deposit rates and then bank rates. We shall take a decision in this regard at our meeting on Monday.”
Other banks will take their cue from the decision of SBI, India’s largest lender.
In order to contain inflation, RBI had increased repo rate by 0.25 percentage points to 7.50% in its mid-quarter monetary announcement on Friday.
“Demand for loan, which was comparatively low in the April-June quarter, is likely to increase in coming days due to festive season which will put pressure on banks to hike deposit rates,” said the retail banking head of a public sector bank.
“We are currently analysing the situation and will take decision soon regarding (hiking) rates,” he said.
Major private sector lenders such as ICICI Bank, HDFC Bank and Axis Bank did not respond to e-mails from HT.
The festive season is expected to see a surge in demand for credit as people look to buy their homes, cars and consumer durables at this time.
My views :------Chief of banks who were hitherto playing in the hands of finance Minister in the matter of interest rate have now started understanding the ground reality of the respective banks. They used to decrease base rate on advances to please ministers even if their fundamental position did not permit to do so. In the recent past CEO of a bank reduced lending rate to gain the good will of FM and after a few days only he retreated when he was made to understand the adverse consequences of reduction in base rate. After all base rate has to be decided taking into consideration a few fundamental points and not that FM advised in the evening and rate reduced in the same night.
I salute SBI which has taken the initiate to increase interest rate in the interest of the bank. I hope when big and giant bank has taken the lead other smaller banks will also follow the suit to survive. All banks will have to increase deposit interest rate to make it more attractive and to increase their lending capacity.
Otherwise GOI will have to adopt old method of Uniform interest rate regime and decide rate structure keeping national priorities.Leaders of banks will have to stop their Yesman culture and should do what is the best in the interest of the bank and in the interest of the customers , investors and depositors and lastly in the interest of the nation.
PSU bank chiefs defy Finance Minister diktat, hike rates-ET-21.09.13
MUMBAI: In a rare display of spunk, some chiefs of public sector banks are standing up to their bosses in the North Block, even differing with them on rate cut, something you wouldn't have heard of in the past.
At least two bankers have, in recent months, raised interest rates despite veiled — and at times, explicit instructions — from New Delhi to not do so. What's even more interesting is that these bank chiefs are close to their retirement.
For instance, State Bank of IndiaBSE -3.44 % chairman Pratip Chaudhuri raised lending rates — a token hike of 10 basis points to 9.80% — on Thursday, a day before Reserve Bank of India governor Raghuram Rajan announced his maiden policy review. Chaudhuri is set to retire at the end of this month. Similarly, BA Prabhakar, former CMD of Andhra Bank, raised rates just a fortnight before he retired in August.
"Those who are not looking for any post-retirement benefits from the government will behave in an independent manner just before they retire," said Hemindra Hazari, head of equity research at Nirmal Bang Institutional Equities. This also underscores the fact that some bankers have taken bold steps to protect their organisation as they near retirement, unlike in the past when they simply toed the line of their bosses.
On July 3, in a closed-door meeting with chief executives of public sector banks, finance minister P Chidambaram had asked them to cut rates to send out a positive signal to the economy. "Someone will have to take a bold move or things will not improve. But if banks lower rates, even if it is a token rate cut, it will send a strong message," the FM had said, according to bankers present in the meeting. Several PSU banks such as Canara BankBSE -4.21 %, Bank of India, Andhra BankBSE -4.40 % and Union Bank of IndiaBSE -7.89 % followed his advice.
But, on July 14, the RBI surprised the market by tightening liquidity and raising the cost of funds, drawing a sharp response from the North Block, and putting these banks in a spot of bother.
Prabhakar, who retired from Andhra Bank in August, said raising rates was absolutely imperative. "Anyway, I was to retire in the next few days. I thought my executive directors would not be able to take a bold step since they were only holding charge in the absence of a new CMD. Also, they would hesitate to do so because of constant counselling from the government against raising rates," he told ET.
SBI hikes lending, deposit rates-Business line
NEW DELHI, SEPT 19:
State Bank of India has hiked its base rate from the existing 9.7 per cent to 9.8 per cent with effect from today.
The country's largest commercial bank has also hiked certain retail deposit rates (for deposits of less than Rs 1 crore) for various maturities from 7 days to 10 years.
Base rate is the rate below which banks cannot lend. The SBI move may prompt other public sector lenders to also hike their base rates.
Benchmark prime lending rate
SBI has also hiked the benchmark prime lending rate by 10 basis points from 14.45 per cent to 14.55 per cent with immediate effect.
After the latest deposit rate hike, SBI will offer 9 per cent interest on 1-10 year retail deposits. Till date, this bank was offering 8.75 per cent on such deposits.
http://www.thehindubusinessline.com/industry-and-economy/banking/sbi-hikes-lending-deposit-rates/article5144822.ece
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