Mumbai, July 25: The Reserve Bank of India (RBI) has sounded the rate-rise signal and banks look certain to hike lending rates. But there’s no clarity on whether deposit rates will also go up.

Banks had raised their deposit rates by 25 to 100 basis points across all maturities between April and July 2006. With the stock market going into a very choppy phase and with the government removing several tax breaks on small savings last February, the money has started to pour into bank deposits.

Aggregate deposits of scheduled commercial banks have soared to levels not seen in the past 12 years. Sitting pretty on a huge cash stockpile, banks will be persuaded to raise deposit rates either out of indulgence or a more practical need to maintain the spread between the deposit and lending rates to avoid sharp credit-deposit mismatches.

Bankers say though deposit rates could inch up, it will not be immediate. They add that a clearer picture is likely to evolve over the next few days when the asset liability committees of most of the banks meet to assess the situation.

Says V.P. Shetty, chairman and managing director of IDBI, “The asset liability management committee will meet shortly to consider the likely impact of the increase in reverse repo rates.”

Shetty feels that though the market interest rates may not change immediately, banks may take a re-look at their deposit rates depending upon the need for liquidity.

“The credit policy review was along the expected lines. The 25 basis points increase in reverse repo rate and similar increase in repo rate was anticipated by market participants and perhaps even discounted by the government security markets. Therefore, there may not be any further increase in government security rates immediately," he added.

Several bankers feel that a deposit rate hike is predicated by the strong demand for credit from the retail and the corporate sectors. With credit continuing to outpace deposit growth, increasing rates could be one of the means to feed this appetite for money.