RBI hikes rates, banks may follow suit

SPIRALING HIGH: With RBI hiking rates, other banks may follow suit and hike interest rates.

    

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New Delhi: As inflation continues in the double digit zone, the Government has decided to pass the onus on to the Reserve Bank of India (RBI) to combat rising prices.

The RBI on Tuesday night raised both the Repo Rate and the Cash Reserve Ratio by 0.5 per cent each.

So the next question that logically follows is: Will banks be raising rates soon? This is what the MD and CEO of ICICI Bank, K V Kamath, had to say on the subject.

"Till the last move, we were still maintaining that liquidity is good. We saw liquidity tightening in the last couple of weeks or so, but on Tuesday night, a Cash Reserve Ratio hike was announced and I expect liquidity to be tighter still," he said.

"The repo rate hike is clearly sending a signal to the markets that the interest rate will move up. How much, we will still have to see," Kamath added.

Joint MD of ICICI Bank Chanda Kochhar said interest rates will rise.

"We need long term solution for inflation. So don't expect rates to go down," She said.