RBI interest rate | Interest rates hike | Hike in Interest rate

RBI interest rate | Interest rates hike | Hike in Interest rate

RBI hikes rates by 25 bps; home, auto loan rates may go up. Rattled by a spiralling inflation, the central bank raised the benchmark short-term interest rates—repo and reverse repo—by 25 basis points.

While the RBI communiqué was issued well after market hours in India, US stocks slipped soon after the announcement as traders felt it was a signal that monetary authorities would be quick in withdrawing the post-Lehman stimulus. Banks are expected to take a call on raising the deposit and lending rates after the March 31 financial closure. According to Chanda Kochhar, CEO of India’s second-biggest lender, ICICI, the bank “will wait and see the credit offtake and systemic liquidity to assess the medium-term impact on lending and borrowing rates”. “Currently, there is ample liquidity in the market,” she said.

Indian Overseas Bank chairman SA Bhat said, “I do not expect interest rates to go up in March... if at all, it may happen next month.” Mortgage giant HDFC said unless there is an increase in the cost of funds, the institution will not increase interest rates. “In the short term, cost of funds is unlikely to change much... It’s more a signal,” said Keki Mistry, vice-chairman and managing director of HDFC.

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