The Hindu Business Line : Banks urge RBI not to hike rates for now

Mumbai, Oct. 12 Faced with a flat credit growth, bankers requested the Reserve Bank of India to continue with its accommodative policy stance and not to hike rates for now, at the pre-monetary policy meeting, held here on Monday. However, the regulator, in turn, warned banks that an exit is necessary at some point of time due to the likelihood of a rise in inflation and therefore, some action was likely, said a banker who attended the meeting.

Situation different

The RBI Governor, Dr D. Subbarao, is understood to have told the bankers that the situation in India was different from other countries and inflationary concerns are strong in our economy. Therefore, India’s stance on continuing stimulus package will vary from other countries.

The consensus that emerged from the meeting was that GDP growth is likely to be in the range of 6-6.5 per cent and credit growth is likely to be 15-16 per cent.

Bankers also asked for the limit on the Held-to-Maturity portion of the SLR portfolio to be increased from the current level of 25 per cent to 27 per cent. The cap on the HTM is making investment in government securities unattractive for banks as they face a risk of mark-to-market losses.

Bankers also asked that they should be allowed the option of shifting the government securities to the HTM portfolio from the Allowed for Sale category more than once a year.

The RBI expressed concern over lending to the Micro Small and Medium Enterprises sector, following complaints that some banks were asking for collateral on loans less than Rs 4 lakh. The RBI asked bank chiefs to personally monitor that lending to this segment is not hampered, said the banker.