The possibility of the Reserve Bank of India (RBI) hiking key rates will lead to increase in lending rates, a Union Bank's Chairman and Managing Director M V Nair said here today.
"There is a strong possibility of the Reserve Bank hiking interest rates at its policy review, as inflation is still very high. If liquidity doesn't improve and policy rates move up, then deposit rates and lending rates would too go up," Nair told reporters on the sidelines of a press meet here.
There are indications that if policy rates move up, there is a possibility that it will get transmitted to the credit market, Nair said.
There is a clear bias for the policy rates to move up for the reason that inflation is still very high and inflationary expectation is to be contained, he said.
The RBI is likely to increase key policy rates by at least 25 basis points in its first quarterly review of the monetary policy tomorrow to tame inflationary expectations.
Inflation is currently in double digits, led by high food prices. For the month of June, it stood at 10.55 per cent.
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On the performance of Union Bank, Nair said, the operating profit for the Q1 FY11 grew by 32.53 per cent to Rs 1,043 crore as against Rs 787 crore in the corresponding quarter of the previous year. Operating profits for Q1 have grown at compound annual growth rate (CAGR) of 25.75 per cent in the last three years.
The bank has registered a net profit of Rs 601 crore for Q1 FY11 as against Rs 442 crore in the previous year, a growth of 35.97 per cent. Net profit for Q1 has grown at CAGR of 38.75 per cent in the last three years.