Inflation has begun to bite; a 12-month high of 6.7 per cent can be seen making it costly for banks to raise funds. Therefore this burden will have to be passed on to the borrowers through higher interest charged on their loans.
In view of increase in inflation IDBI Bank has withdrawn the 0.5 per cent cut in rates of home loans and other debt it had announced on Wednesday. According to industry experts more banks are likely to follow suit.
Besides from IDBI, HDFC, State Bank of India, Canara Bank, Bank of Baroda, Bank of India, Allahabad Bank and Union Bank of India had cut loan rates since February 1.
Banking sources, requested for secrecy, confirmed that they are seriously thinking of raising loan rates but are waiting to see which way inflation will head now.
Confirming inflation is the cause, IDBI’s chief financial officer R.K. Bansal told Hindustan Times: “Our decision is in line with market trends. We may reconsider after 10 days.”
A rise in interest rates is expected after benchmark security profit rose by 0.13 per cent to 7.91 per cent in the government securities market.
M.S. Sundara Rajan, chief of Indian Bank, said: “It’s too early to predict upward movement in interest rates...” A senior banker added, “We can wait till the Credit Policy next month to decide.”
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment