Reserve Bank of India scotches ICICI Bank rumours, Government says don’t panic, we are watching

Finance Minister P Chidambaram and regulators, SEBI and the RBI stepped in to soothe financial markets today after the benchmark Sensex plunged 442 points or 3.5 per cent to its lowest levels in two years and panic gripped ICICI Bank customers who queued up outside ATMs in certain cities to withdraw deposits. Their assurances helped and the market closed 2.1 per cent up at 12,860 points.

Barely minutes after the market opened sharply lower, SEBI chairman CB Bhave who was in Delhi allayed fears of the impact of the global credit crisis on the Indian markets. “There is no panic... we are monitoring the situation closely. We will take the severest action against any institution circumventing our short-selling rules,” he told reporters before his meeting with the Finance Minister and other officials in North Block.

After a meeting with Bhave and economic affairs secretary Ashok Chawla, Chidambaram said, “We are suffering the consequences of turbulence around the world. Basically, the Indian market is a sound, attractive and well-regulated market.”

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State Bank of India hikes lending rates 0.5%, others waiting to follow

Banks have started hiking lending rates following the Reserve Bank move to raise the cash reserve ratio (CRR) and repo rate by 0.50 per cent each in a bid to rein in inflation. State Bank of India, India’s largest commercial bank, announced a hike in its benchmark prime lending rate by 0.50 per cent to 12.75 per cent with effect from Friday.

Union Bank of India (UBI) has raised its benchmark prime lending rate by 50 basis points to 13.25 per cent. The new rate will be effective from July 1. Other banks have already indicated that they would be raising the rates in the next few days.

According to SBI, the revision will be applicable to all PLR-related lendings and the bank was only restoring its benchmark rates. This means loans (including home, auto and personal) which are linked to PLR would move up. Usually, floating rates on home loans are linked to the benchmark prime lending rate (BPLR). ICICI Bank and HDFC — two leading players in the home loan segment — are expected to take a decision within one or two days.

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