RBI credit policy may lead to hike in interest rates on loans

RBI credit policy may lead to hike in interest rates on loans

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Asia Bizz: The Reserve Bank of India’s (RBI) move to increase the key policy rates by 0.25 percentage points, may in the future lead to the increase in the interest rates for auto, home and corporate loans. The announcement on the policy rates was recently made after which the Chairman of Bank of Baroda, M D Mallya, said that the rate hike was expected and that the direction to which the policy points is hardening.

While the Indian Overseas Bank chairman and Managing director, M Narendra said that the RBI’s move may not immediately accelerate the interest rates on the loans. “I think rates would remain stable during this month. Beyond March, it would depend on various factors like call money rates etc,” Narendra said in a statement.

The RBI increased the key short term lending and borrowing rates as a measure to tackle inflation. Moreover, this is the eight time RBI has increased the key policy rates, since March 2010.

HDFC Bank head treasurer Ashish Parthasarthy said that such a hike from the RBI was expected by the market. The executive director of Union Bank, in agreement to the other bankers, said that the rate hike was expected but also insisted that this would not lead to an immediate rise in the loan interest rates.