RBI Governor D Subbarao on Tuesday said higher-than-expected
rate hike of 50 basis points could have an adverse impact on the asset quality of banks but asserted that it would not pose any systemic risk as of now.
Quoting bankers, who met him after the credit policy this morning, the Reserve Bank Governor said at post-policy press conference, "They (bankers) told us that the NPA (situation) can come under stress especially in some interest-rate sensitive sectors."
However, he was quick to add that the deterioration is not systemic. "It is our understanding that there would be no systemic risks," the Governor asserted.
With Tuesday's hike, the 11th since March 2010, the central bank has increased its key rates by a cumulative 3.25 percentage points in its effort to tame the uncomfortably high headline inflation which stood at 9.44 per cent in June.
The rising interest rates and increasing commodity prices which affect input costs, coupled with a general sense of a slowdown in economic growth are widely believed to hurt businesses.
The bankers told the monetary authority that the rising interest rate regime would increase the risk of bad loans in the system.
The nation's largest lender State Bank chairman Pratip Chaudhuri concurred saying, "there are signs of pressure on asset quality."
All the bankers have told RBI that the policy rate hike transmission will be "rapid", the Governor said. It means that the rate hikes will start pinching borrowers sooner than they have so far.
Special 
