PTI
Mumbai, June 22: Runaway inflation coupled with monetary tightening by the Reserve Bank could lead to higher interest rates on both the lending and deposit sides, top bankers said.
"We are awaiting signals from the RBI. There is no doubt about a rate hike.The only questions are the quantum of increase and their timing," IDBI Bank Chairman and Managing Director Yogesh Agarwal told PTI here.
Agarwal said further monetary tightening from the apex bank was expected in the form of a repo rate hike or an increase in the Cash Reserve Ratio (CRR) to contain double-digit inflation, now at a 13-year high.
"While the hike in CRR came as an indirect signal to banks, the increase in the repo rate was a clear signal. We will have to wait and see whether the RBI will come up with more direct signals," Agarwal said.
A similar view was expressed by Corporation Bank Chairman and Managing Director B Sambamurthy who said, "there is a clear upward pressure on both lending and deposit rates... We are awaiting cues from the RBI." The bank is likely to meet next week to review its interest rate structure.
Ballooning inflation has resulted in negative earnings for customers on their bank deposits.
In a bid to attract deposits and retain existing ones, banks would now have no option but to effect a hike in their deposit rates, which, in turn, would force them to effect a similar hike in their lending rates as well, a senior Corporation Bank official said.