Banks likely to raise rates, while RBI maintains status quo

The banks might hike interest rates, given the risks such as surging bond yields and more provisioning requirements depleting profit margin.

The banks might hike interest rates, given the risks such as surging bond yields and more provisioning requirements depleting profit margin.
 
The move will be against Reserve Bank of India's plan to maintain status quo on the rates in its recent monetary policy review.
 
According to a report by Reuters, HDFC Bank, India's second-biggest bank after State Bank of India by assets, on Wednesday raised rates by 10 basis points. 
 
It is said that other major banks are likely to follow suit.
 
As per an RBI staff study, every 100 bps increase in borrowing costs lowers the investment rate by as much as 91 bps.
 
"Lending rates will move up. We cannot avoid that from happening," the chief of a large state-run bank told Reuters.
 
Reserve Bank of India, in its sixth bi-monthly Monetary Policy Statement of 2017-18, has kept the policy repo rate unchanged at 6.0 per cent.
 
The reverse repo rate has been kept at 5.75 per cent and the marginal standing facility (MSF) rate and the bank rate at 6.25 per cent.
 
Source: Reuters & Media reports

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