Canara Bank sees lending rate rising

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Mumbai, Aug 10: MBN Rao, Chairman and managing director of Canara Bank called for lowering transaction costs and paper based transactions and urged customers to reduce dependence on pass books.

He was speaking at conference on technology for micro banking, here on Friday. On the inter4est rates, Rao opined that the recent measures by the Reserve Bank of India on the CRR hike of 50 basis points and the government curb on external commercial borrowings have already impacted short term interest rates upwards and the market now appears to have settled down.

He said credit quality requirements in developing countries like India are expected to improve and the credit has not been priced adequately. Henceforth, advances would not be available at lower rates as they would be priced based on credit quality. Moreover, the pricing would be based more on risk rather than liquidity. He also added that credit spreads would widen. With respect to the effect on banks with investment portfolios based abroad, he said banks with term loan portfolio abroad would not require protection whereas those with FRNs would be the likely affected parties. He concluded that India would continue to attract foreign investments.