Banks unlikely to raise lending rates amid weak demand for loans

Posted By: Religare
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Banks unlikely to raise lending rates amid weak demand
Amidst weak demand for loans, the Banks are uncertain to increase the lending rates in near future despite recent liquidity tightening measures announced by the RBI to hold rupee fall.

"Loan demand is too weak. That is why there may not be enough demand. We are waiting because these steps are supposed to be temporary. So, unless they (RBI) linger on for very long, none of the banks are increasing their loan pricing," State Bank of India, Chairman and Managing Director, Pratip Chaudhuri told media.

According to the statement of Reserve Bank of India, liquidity tighten measures were short-term in nature and would be rolled back as rupee stabilised.

Recently, RBI has taken several measures like capping the borrowing limit under Liquid Adjustment Facility (LAF) corridor, sale of government bonds through open market operation (OMO), minimum daily cash reserve ratio (CRR) balance, among others, to squeeze rupee liquidity to stem fall in the domestic currency.

However, these measures had pushed short-term money market rates along with government bond yields to higher levels, creating fear of increase in cost of funds for financial institutions.

Read more about: banks, lending rates
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