OBC to work with other banks on lending rate hike

Public sector lender Oriental Bank of Commerce (OBC) today said it will take a call on hiking lending rates in tandem with sector peers, while virtually ruling out any hike in deposit rates by suggesting that they have already peaked.

"We may have to increase our lending rates, but we have not finalised anything. We will work in tandem with the banking system," OBC Chairman and Managing Director Nagesh Pydah told reporters here.

He said that deposit rates have reached an 'ideal' level and the bank would not like to touch them at this moment.

"The deposit rates have reached a level where we want it to be. At the moment we do not have any plan to hike them," Pydah said.

His comments came in the backdrop of the recent announcement by the Reserve Bank to hike its short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each.

Yesterday, private sector lender HDFC Bank said it will hike lending rates soon, while ruling out any hike in deposit rates.

OBC today reported a 41 per cent growth in net profit at Rs 408.25 crore for the third quarter ended December 31, 2010, from Rs 289.43 crore in the corresponding quarter last year.

Total income of OBC increased to Rs 3,264.17 crore at the end of December 2010, from Rs 2,909.27 crore in the third quarter of last fiscal.

Pydah said that the bank is looking for a profit growth of 20 per cent this fiscal.

"Last year we had a profit of Rs 1,135 crore and this fiscal we should be able to increase it by 20 per cent," he said.

Regarding the high credit growth in the banking system, a matter on which the RBI had last week expressed concern, Pydah said the OBC has maintained a balanced growth.

"We have a credit-deposit ratio of 70.32 per cent which is safe. While our credit has gone up by 15.59 per cent year-on-year, the deposits are up by 16.79 per cent," he said.

The RBI had fixed a target of 20 growth in credit and 17 per cent in deposits for the banks this fiscal. However, many major banks have recorded major increase in advances while deposits have remained down, while skewing the balance and forcing the central bank to express apprehension.

OBC also reported a net interest margin (NIM), or the difference between the interest income generated by banks and the amount of interest paid out to their lenders, at 3.1 per cent during the third quarter, up from 3 per cent in the previous quarter.

"Overall, in the first nine months of the fiscal we have a NIM of 3.25 and so we should be able to maintain our target of 3.2 per cent for the year," Pydah said.