The bankers have hailed the series of measures announced by the Reserve Bank of India (RBI) on last Saturday to boost liquidity and improve credit delivery system. The bankers, however, ruled out futher rate-cuts immediately.
MD Mallya, CMD, Bank of Baroda said that it would provide a sort of boost to the banks as it would reduce their capital requirements after their risk weights have been reduced.
“Now the banks can look at extending finance to even those sectors, subject to their risk perception on individual basis. But for the lending rates to come down, the deposits’ rates have to be reduced and it is difficult for me to tell when exactly will it happen,” he said.
Ashok Mukand, chief financial officer State Bank of India (SBI) said that the recent steps taken by the RBI would make available some amount of capital to those banks whose CAR was less than 12%.
“But, it will be too early for me to comment when our rates will be reduced further,” he said.
Allen CA Pareira, CMD, Bank of Maharashtra, said, “Reduction of risk weight and provisioning made by the RBI will definitely help banks like ours improve the CAR. My bank’s CAR currently stands at 10.8%. Now pricing is the issue and not the liquidity. But further round of rate-cut may not happen immediately.”
Partho Mukherjee, treasury chief, Axis Bank said, “The reason why the Indian banking space is not yet witnessing the lower interest rate scenario is that the bankers are still not confident about the presence of medium to long term liquidity in the system. Once they are convinced on the liquidity factor, the rates will start falling in. I expect the credit-offtake to grow over 20% in this fiscal as inflation might come down at around 6% by March 2009.”
Another official from a prominent private sector bank said that the lending rates were not likely to fall drastically in the current calendar year as cost of deposits has remained high.
“It might not get altered until a further CRR cut. Liquidity in the system has become marginally deficit from an excess in the past two weeks as government spending has not yet infused funds in the system and also RBI is intervening in the forex market to control the Re-dollar rate,” he said.