Banks want RBI to keep rates and fight inflation as well
05 Apr 2010
Banks want the Reserve Bank of India (RBI) to keep lending rates unchanged as they fear it would mar the current liquidity scenario. They, however, expect the central bank to announce measures to tame rising inflation.
Chief executives of the member banks of the Indian Banks' Association (IBA), who met Reserve Bank governor D Subbarao on Monday in Mumbai, two weeks ahead of the annual monetary policy scheduled for 20 April, said none of them expected an increase in lending rates at present, given the reasonable liquidity in the system.
They feel the current interest rates are fine and expect bank credit to grow at over 20 per cent in FY11. The banks' fears are based on a Citigroup report that said the RBI may raise key rates to check inflation.
"We feel there is no upward pressure on interest rates, NPA's (non performing assets) will be lower" Federal Bank and chief executive M Venugopalan said.
"The general expectation is that the 8.5 per cent GDP growth (in FY11) will happen. Credit and deposit growth is expected at 20-22 per cent," Union Bank of India chairman and managing director and Indian Banks Association chairman MV Nair told reporters after the meeting.
He also pointed to a possible rise in bad debts, mainly from restructured assets, which, they felt, could be within manageable limits if the economic recovery sustains.
