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RBI rate hike good for banking sector: SBI report

The decision to hike rate will be ultimately good for the banking sector as the risk is getting re-priced properly, SBI’s Economic Research Department said in a report.

“The situation is different than during the global financial crisis wherein the lending started increasing aggressively (FY05 onwards) much before the rate hike cycle began (Mar’2010 till Oct’2011). Currently, the rate hike cycle has begun and now the bank lending will increase factoring in the risk,” said Dr Soumya Kanti Ghosh.

The report titled ‘Expect repo hikes in June and August too: 75 bps rate hike in FY23 looks imminent’ has been authored by Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.

The Reserve Bank of India’s unexpected 40 basis points increase in policy rates has rather rattled the market.

In an off-cycle meeting, RBI Governor Shaktikanta Das announced announced hike in benchmark repo rate by 40 bps and another 50 bps hike in CRR kept the broader markets on the tenterhooks. The MPC also decided to remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth, reflecting the pragmatic approach even while traversing the chequered path assiduously.

“With today’s increase, the standing deposit facility (SDF) rate now stands adjusted to 4.15% and the marginal standing facility (MSF) rate and the Bank Rate to 4.65%, maintaining the LAF corridor,” the report said.

Meanwhile, the Federal Reserve has raised its benchmark interest rate by a half-percentage point Wednesday — its most aggressive move since 2000 — and signaling further large rate hikes to come.

The increase in the Fed’s key short-term rate raised it to a range of 0.75% to 1%, the highest point since the pandemic struck two years ago.

Srinagar News

Srinagar News is one of the oldest newspaper in kashmir it was founded by Late Mehraj-ud-Din Wani Sahab in 1975.

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