Andhra Bank hints at increasing lending rates

HYDERABAD: Public sector lender Andhra Bank on Thursday hinted that it would increase lending rates after the Reserve Bank's move to up its key policy rates.

R Ramachandran, Chairman & Managing Director, Andhra Bank said there will be some pressure on net interest margins (NIM) with the RBI's decision going forward.

NIM is the difference between interest earned and interest paid by the bank.

Andhra Bank has registered a net profit of Rs 1,267 crore for the fiscal ended March 2011 as against Rs 1,046 crore in the previous fiscal. The total business of the bank for the financial year 2011 stood at Rs 1,64,310 crore, at a year on year growth of 22.44 per cent.

"We see a marginal hit in the NIM going forward. While we would follow growth trends in a sustained manner, there has been a significant increase in the cost of deposits between January and March, the lag effect of which will be seen in coming quarters. There is a case for revision of rates and we may increase our benchmark prime lending rate," Ramachandran told media persons after announcing the annual results.

According to him, a decision on interest rates will be taken next week.

NIM of the bank stood at 3.69 per cent for the last quarter of FY 11 and 3.80 per cent for the entire FY11. However, the bank does not expect much impact with the central bank's initiative to increase savings bank deposit rates. The impact to cost will be around Rs 100 crore overall, Ramachandran said.

Talking about the bank's growth plans, Ramachandran said the bank is aiming to cross Rs two lakh crore business mark with 18-20 per cent growth in deposits and 20-25 per cent growth in advances in the current fiscal.

Source: EconomicTimes