CRR hike might not affect SMEs

The Reserve Bank of India on Friday in its third quarter review of monetary policy 2009-10 increased mandatory cash reserve of banks held by it by 75 basis points.

Bankers and other experts say said that they do not expect hike in interest rates for six months despite the hike in the Cash Reserve Ratio.

Mr M.V. Nair, Chairman, Indian Banks' Association and CMD, Union Bank of India, said that in general banks may not pass on the higher cost to borrowers at least up to the first quarter of the next fiscal. This means retail and SME borrowers have no reason to fear an interest rate hike, at least for the next six months.

Mr O.P. Bhatt, Chairman, State Bank of India also told reporters that he does not expect lending rates to change in the next six months. Deposit rates may not immediately go up either.