Interest rates are likely to remain stable, but as liquidity dries up banks may hike the lending rates of short-term loans to companies, which are often 'mis-priced', a top central bank official today here said.
"Overall interest rates will remain the same...(However) in segments, where interest rates are mis-priced, you could see some increase...Like in short-term corporate loans," Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty said.
Chakrabarty was referring to the practice of banks lending to customers, primarily corporate clients, at rates that are much lower than their benchmark prime lending rates (PLR) or sub-PLR rates, which could be interpreted as mis-priced or under-priced loans.
Many banks have seen revival in demand for corporate loans in the recent months on the back of economic recovery propelled by the stimulus measures provided by the government since December 2008, following the collapse of the Wall Street titans in September that year.
Even after the central bank had hiked the cash reserve ratio recently, bankers said given the modest credit offtake, hiking lending rates would hamper the reviving demand, impacting their interest earnings.
It can be noted Following the earlier-than-expected economic recovery but amidst galloping food inflation, the RBI, in its third quarterly monetary policy review on January 29, begun an exit from the easy money regime by upping cash reserve ratio or the prudential amount of money that banks have to park with RBI on January 29, by 0.75 per cent to 5. 75 per cent.