New Delhi, Apr 18: ICICI bank Managing Director and chief executive officer K V Kamath on Friday said the CRR hike by 0.5 per cent will have an impact on profitability of banks, but its effect on interest rates is not clear as of now.

"There is going to be profitability impact on banks, that I think is given because whatever is kept aside as CRR, you are not going to get interest on it," Kamath told reporters on the sidelines of convocation function of international management institute here.

To a query that whether banks are going to raise rates, Kamath said it is a decision that they will have to take in due course. "You can always increase the interest rates, but there is an issue that there has to be a demand for credit... You need to see what in competitive context people do before you go for any rate adjustment," he said.

The Reserve Bank yesterday raised the Cash Reserve Ratio (CRR) -- the proportion of depositors' money that banks have to park with the banking regulator -- by half a per cent to eight per cent.

The move, which came ahead of RBI's annual credit policy that is to be announced on April 29, would take out Rs 18,500 crore from the banking system.

Kamath said there is ample liquidity in the system and only a small amount is being sucked out. He said "there is a strong pipeline of investment and we are not seeing any slowdown in that so far".