NEW DELHI:

Reserve Bank's recent decision to increase short term lending rate will hit ICICI Bank, Yes Bank and Oriental Bank of Commerce the most as they are heavily dependent on money market for their funding needs, says a study.

"Those likely to see negative impact will be ICICI Bank, Yes Bank and Oriental Bank of Commerce. Banks that will be relatively cushioned due to their high CASA (current and savings account) ratio are HDFC Bank, Axis Bank, Punjab National Bank and State bank of India," a report by financial services firm Edelweiss said.

On June 11, the RBI had hiked its short-term lending rate (repo rate) by 0.25 per cent to 8 per cent with immediate effect. The report further raised the probability of hike in deposit and lending rates by the banks in the weeks to come due to RBI's decision to increase the repo rate.

Meanwhile, Yes Bank increased prime lending rate by 0.5 per cent to 16 percent and the deposit rates by same percentage point with immediate effect, following the hike in repo rate effected by the Reserve Bank.

Following the announcement, the country's largest lender SBI decided against upward revision of the interest rate while Jammu & Kashmir Bank revised its PLR by one percent to 14 percent last week.

In the medium term, the report said, the credit creation would start slowing down with interest rate expectations remaining high and banks would have to raise their deposit rates to compensate their hike in interest rates.

The report further pointed out that retail asset book could deteriorate further if the interest rate are passed on to customers.