An official of state-run UCO Bank told PTI that there were inflationary expectations in the economy, as a result of which interest rates would see a sustained rise through the end of the current financial year.

The official said that as banks were making a calculation of projected outflow of advances as on March 31, they were now in a mad rush to grab deposits by raising interest rates.

While some banks were giving 9.25 per cent on individual deposits, corporates were given more than 10 per cent interest on bulk deposits.

When asked whether there was fear of an impending liquidity crisis, the official said that there was no such apprehension at the moment.

Recently, the Reserve Bank of India hiked CRR in two stages from 5.5 per cent to six per cent with the view to suck out excess liquidity in the system to contain inflation.

An official of Allahabad Bank echoed the view, saying that there was no fear of a liquidity crisis in the system.

He said the hike in CRR had locked Rs 149 crore (Rs 1.49 billion) of the bank, adding that this would have an adverse impact on its profitability as this amount would not fetch any interest.

To a query, the official said that though there were inflationary pressures in the economy, RBI would not hesitate to take any step to contain it by using the instruments at its disposal. The official said that rates for retail lending would see a rise.

Bankers were of the view although sufficient liquidity were sucked out of the system, there were fear of a crisis since the savings were at a high level.

For UCO Bank, the money locked as a result of CRR hike is around Rs 140 crore (Rs 1.4 billion). Overnight call rates had also shot up following CRR hike. Bankers, however, also do not rule out a further CRR hike in near future.