Interest rates likely to freeze in six months
By siliconindia   |   Wednesday, 08 July 2009, 21:55 IST   |    1 Comments
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Interest rates likely to freeze in six months
Bangalore: "Interest rates could harden or become solidify in second half of the year as demand for credit picks up," said O P Bhatt, Chairman State Bank of India (SBI). He feels that credit market will pick up in the next six months and there after rates can either stabilize or even harden. The growth of Indian bank loan market slowed down by almost 50 percent against last fiscal and by around 40 percent since November'08. SBI, along with its associates control a quarter of the Indian bank loans and deposits. Bhatt says, "There is chance of higher loan growth in coming quarters as lot of signs are visible in the economy that business activity is increasing across multiple sectors." Reserve Bank of India (RBI) took initiative to lift the economy by cutting its main lending rate by 425 basis points in Oct'08. State run banks also responded well by reducing their rates by 150-200 basis points. Recently SBI Chairman with chiefs of other bank met D Subbarao, Central Bank Governor to talk about the current 'liquidity overhang' in the system and managing government borrowing without stress ahead of a quarterly monetary policy review on July 28. A liquidity overhang in India's banking system is the area of concern for the RBI since long time. Finance Minister Pranab Mukherjee announced in budget on Monday that the fiscal deficit would touch a 16-year high of 6.8 percent of gross domestic product and the government would borrow from the market to bridge the shortfall. Commercial banks also asked RBI to extend loan restructuring programme till December, said Bhatt.

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