ICICI rate hike prompts peers to take cues

ICICI Bank's third round of hike in its prime lending rate on Monday has triggered hectic parleys in other banks too, to take a decision on revision of their respective loan and deposit rates.

State Bank of India too is exploring the option of a hike in its prime lending rate and deposit rates in line with the rising interest rate scenario. A decision in this regard is expected to emerge in April.

Though the issue was discussed in the Asset Liability Committee meeting held Monday, no decision was taken.

Speaking to newspersons at the conference held by Fixed Income Money Market and Derivatives' Association, A K Purwar, chairman, SBI, however, said rates would continue to be stable in the near term.

The liquidity situation, he said, will improve somewhat by the end tof the financial year, following state and central government spending.

While the bank's PLR is hovering at 11 per cent, deposit rate for five years is in the range of 7-7.5 per cent, thus leaving the bank with a lot of leeway for effecting a change.

Partha Mukherjee, head - treasury, UTI Bank, said, "We are currently examining the rate structure and will take a call on hiking rates in a week. Given the current scenario, rates across the industry are slated to rise over the coming months."

HDFC Bank is watching the interest rate scenario before taking a final call on revising its rates, but no final decision has yet been taken.

The bank has a lot of room for realigning its rates with the current market as the deposit rates range from 5.5 per cent to 7 per cent and prime lending rate is at 11 per cent.

The same holds true for IDBI bank with its PLR at 10.5 per cent. Moses Harding, executive vice-president, IndusInd Bank, however, ruled out any change.

He said, "We do not plan to hike our corporate lending rates further. In December 2005, we hiked our corporate lending rates by 100 basis points to 13.50 per cent from 12.50 per cent."

The global hike in interest rates, upward revision in the open market liquidity adjustment rates (repo) by the Reserve Bank of India and the prevailing tightness in the liquidity situation have led to hardening of the interest rates.