'Large investment inflows can pose a risk too'

Banks didn't raise lending rates even after three earlier rate increases by the central bank. Bankers now say they don't anticipate raising rates soon. Is it a worry?

We are now in a liquidity situation where the repo window is operational.

The Reserve Bank is injecting liquidity. Credit growth has begun looking up and becoming more broad-based. Together, these conditions should translate into higher rates.

From what we have seen and what bankers told us, an interest rate increase is on the cards.

In the first half, on the other hand, because of excess liquidity, it was perhaps a reasonable response. When cost of funds was not going up, why would you want to raise rates? But this is a different situation right now.

Text: Business Standard

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Also see: RBI tightens monetary policy