Rate hike to affect treasury income of banks: S Chandrasekharan, UCO Bank

In an interview with ET Now, S Chandrasekharan, ED, UCO Bank, shares his views on the RBI credit policy. Excerpts:

Mythili Bhusnurmath: How will the hike in the repo rate impact your borrowers?

S Chandrasekharan: There is not going to be any easing on the stress. I do not think banks will be increasing their rates in the near future because credit growth has not really picked up. So, further increase will affect credit growth. Unless inflation comes down, I do not think the Reserve Bank of India is going to change their stance. There is going to be a down slide in the food inflation.

Taking cue of the dovish stance that the Reserve Bank takes, if inflation comes down, they may reduce the rate of interest.

Mythili Bhusnurmath: What do you think the impact of this will be as far as bank treasuries are concerned?

S Chandrasekharan: The increase in rate is going to affect the treasury incomes of the banks.

Mythili Bhusnurmath: Do you see a contradiction as far as the rate hike and liquidity is concerned? Why are they on one hand hiking rates and on the other hand, infusing liquidity?

S Chandrasekharan: Yes, we are seeing this for quite some time now. Since credit is not picking up, I do not think banks will be increasing any rate on the liability side. Though the Urjit Patel Committee says that it should grow in tandem, that is when the RBI increases rate. I do not think that the banks will be increasing the deposit rates in the near future.