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Banks may raise rates to battle eroding profits even as RBI stays 'neutral'

An RBI staff study showed every 100 bps increase in borrowing costs lowers the investment rate by as much as 91 bps

Reuters  |  New Delhi | Mumbai 

India's struggling economy is facing a new challenge: banks are raising interest rates even though the central bank is leaving its rates unchanged, as risks such as surging bond yields and more provisioning requirements erode their profit. HDFC Bank, India's second-biggest bank by assets, on Wednesday became the latest to raise some rates by 10 basis points. The same day, the Reserve Bank of India (RBI) kept its policy rate unchanged, to "carefully" nurture economic growth. Other major banks are likely to follow suit, raising concerns of de facto rate increases ...

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First Published: Fri, February 09 2018. 07:12 IST