The Reserve Bank of India is treading a fine line while trying to cope with growing market expectations of a 25 basis points hike in its credit policy which will be announced on Tuesday.
"We expect RBI to raise rates by 100 basis points by October 2011, with a 25 bps hike on Tuesday," chief India economist at Bank of America Merrill Lynch, Indranil Sengupta said. Also, the bank could tighten provisioning norms for bank loans to real estate and might accept some part of the Deepak Mohanty report, according to him.
the central bank would up rates by 25 basis points and not 50. "central bank expect a steady progression of 25 bps with 75-100 bps till December or maybe even up to March," he said.
Rate hike, whether it is 25 or 50 basis points, will be passed on to customers, according to Canara Bank's chairman and managing director S Raman. "The hike will translate to lending rate hikes," he said however, adding that in case of interest rate hikes, the burden won't be passed on. "Banks have been ahead of the curve for deposit rate hike," he pointed out.
So will the anticipated 100 bps hike up until December mar the credit demand? Sengupta says not really. He expects a 20% loan growth this year—a step down from 23-24% levels that the bank has seen. "The full impact of higher rates will be probably felt towards the end of the year. It’s not until the first quarter of next year that lending rates will really start biting growth as such,"
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"We expect RBI to raise rates by 100 basis points by October 2011, with a 25 bps hike on Tuesday," chief India economist at Bank of America Merrill Lynch, Indranil Sengupta said. Also, the bank could tighten provisioning norms for bank loans to real estate and might accept some part of the Deepak Mohanty report, according to him.
the central bank would up rates by 25 basis points and not 50. "central bank expect a steady progression of 25 bps with 75-100 bps till December or maybe even up to March," he said.
Rate hike, whether it is 25 or 50 basis points, will be passed on to customers, according to Canara Bank's chairman and managing director S Raman. "The hike will translate to lending rate hikes," he said however, adding that in case of interest rate hikes, the burden won't be passed on. "Banks have been ahead of the curve for deposit rate hike," he pointed out.
So will the anticipated 100 bps hike up until December mar the credit demand? Sengupta says not really. He expects a 20% loan growth this year—a step down from 23-24% levels that the bank has seen. "The full impact of higher rates will be probably felt towards the end of the year. It’s not until the first quarter of next year that lending rates will really start biting growth as such,"
Get the all market news and Stock Tips visit: Stock Intraday Tips.
