The Hindu Business Line : Interest rates may not harden this fiscal: Bhatt

Hyderabad Oct. 22 The Chairman and Managing Director of State Bank of India, Mr O.P. Bhatt, does not foresee any hardening of interest rates in the second half of the fiscal due to the high liquidity in the system.

In the same vein, he rules out the possibility of fresh cuts in rates. “I think it will be difficult for banks to cut rates in the remaining part of the year, as the high liquidity position has already prompted banks to lower prices of products.

“Moreover, a significant portion of the liquidity is through deposits that carry a fixed rate for a period of time,” he told presspersons on the sidelines of a CEO’s roundtable conference on ‘Corporate Governance’ organised by the Indian School of Business here on Thursday.

In response to a question, he did not think excess liquidity could fuel inflation. Instead, rising commodity prices could be a concern as far as inflation was concerned, he pointed out.

He felt that credit off-take, which was robust, is likely to go up in the second half of the fiscal, with the economic indicators pointing towards 6.75 per cent growth, as against the early expectations of 6.5 per cent. Retail credit was strong, but it could be much better, he said.

He said corporate loans off-take could also have been better, as corporates perhaps were looking at other avenues to raise money including IPOs.

Asked about the RBI’s proposal to have a new base rate to replace the Benchmark Prime Lending Rate (BPLR), he was of the opinion that this could bring about better transparency.