State Bank of India (SBI) Chairman O P Bhatt today said interest rates could go up by by 100 basis points if liquidity conditions tighten.
Given the present liquidity condition and the government borrowing progamme, which is likely to start in the near future, there could an upward pressure on the interest rates, Bhatt said at the Banking Conclave organised by industry body Ficci here.
"There is a possibility of interest rates going up by 25 to 100 basis points, if liquidity is not managed well when the busy season picks up," he said. The busy credit season in India usually starts from October and continues till March.
With government borrowing yet to start, the movement of interest rates would depend a lot on that, Bhatt said.
As per the Budget estimate, net borrowing by the government in the current fiscal is pegged at a whopping Rs 3,97,957.47 crore to fund its widening fiscal deficit projected at 6.8 per cent of GDP this fiscal due to a slew of measures taken to boost the economy, which is facing the impact of financial meltdown.
Stating that the banking system is flushed with funds at present, SBI chief said that as of now there is so much of liquidity in the system that more than Rs 1 lakh crore is being put by various banks with the Reserve Bank of India.
