Home, auto loans to become costlier

Bombay- Retail and corporate credit,
including home and auto loans, are set to become costlier
after the Reserve Bank's latest increase in the key rate,
bankers said today. "Banks are likely to increase both lending and deposit
rates following the RBI action. There could be a minimum 25-
basis point rise in lending rate," Oriental Bank of Commerce
Executive Director S C Sinha told to Panjab Dardi reporter.
Banks have not raised interest rates following the
September review of credit policy, Sinha said.
With present round of rate hike, banks would have to
readjust rates in line with increase in cost of funds, Sinha
added.
The Reserve Bank of India (RBI) has raised the repo rate
by 25 basis points to 8.50 per cent and reverse repo will move
up by a similar percentage to 7.50 per cent.
Repo is the short-term rate at which the Reserve Bank of
India (RBI) lends to banks, while reverse repo is rate at
which it gets funds from banks.
The central bank has hiked the policy rate five times
this fiscal. In the last-one-and-a-half months alone, it has
raised the key rate (repo) by 50 basis points.
Echoing Sinha's views, IDBI Bank Executive Director R K
Baansal said "lending rate would certainly go up on two
counts-- one RBI has raised policy rate and second
deregulation of deposit rate on savings bank accounts".
Cost of funds will go up for banks and some increase will
be passed to customers, Bansal said, adding that the rate hike
could be in between 25-50 basis points depending on the
liquidity positions of each bank.