‘Loans to get cheaper by 50-75 bps in December’
Loans for corporates and individuals could become cheaper by about 50-75 basis points by December, HDFC Bank managing director and CEO, Aditya Puri, said on Friday.
Speaking at Idea Exchange, Puri explained that the fall in interest rates would, however, be a combination of several factors.
As the government starts spending more from next month, the liquidity in the system would improve,which would then lead to a rise in bank deposits and allow banks to pass on rate cuts to customers — right now, with liquidity tight and banks fighting to mop up deposits, there was virtually no scope to lower deposit rates.
“Although, the Reserve Bank of India (RBI) has said that there is little headroom to cut rates; this is based on current factors,” the HDFC Bank chief observed, adding that as the government’s deficit came down, in the new financial year, it would also reduce pressure on rates. Puri believes that the problem today is not so much the poor accretion of deposits but the weak demand for loans. “If a company wants a loan, it can get it,” he said, asserting that for a viable project, there was no shortage of funds.
Pointing out that lower interest rates could only aid growth and not propel it, the HDFC Bank CEO felt the environment would get better as the CCI (Cabinet Committee on Investments) process cleared more stuck projects. Consequently, with more projects getting off the ground, India Inc would spend more, driving up investments. The increasing
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