Rates seen stable in short term

Interest rates are seen remaining stable in the short term. Chairmen of State Bank of India (SBI), the country's largest bank, and Industrial Development Bank of India (IDBI) said they saw no pressure to raise interest rates for now.

"I think interest rates should remain stable in the short-term. This is also the time when deposit growth picks up," SBI Chairman O P Bhatt told reporters in New Delhi, but did not comment on whether he expects the Reserve bank of India (RBI) to increase rates when it reviews monetary policy on January 30.

IDBI Chairman V P Shetty said there was adequate liquidity to support credit growth and the lending rates need not be tinkered with now.

"The deposit growth has been 17-18 per cent and keeping resource accretion in focus, 20-25 per cent growth in credit is tenable for the banking sector," he said.

The growth in credit has been around 20 per cent till November 10 this year. This is as against 29 per cent growth in credit.

Shetty said, "Banks have to look beyond deposits for mobilising resources. The liberalisation of external commercial borrowing (ECB) norms will partly help banks to raise funds to finance long gestation infrastructure projects."

Bhatt pointed out that there had been a slowdown in credit growth from 31 per cent in 2005-06 and banks are also re-balancing their portfolios and raising the resources needed to meet credit demand.

In the quarterly policy review on October 31, the RBI had hiked the repo rate by 25 basis points to 7.25 per cent to urge banks to rebalance their credit portfolios as the deposit growth was not matching the credit offtake.

Banks were warned that if they do not re-balance their portfolios, they will have to access liquidity at higher costs.