Ahead of the forthcoming credit policy during the month end, the RBI is meeting the leading bankers on January 17, to discuss the liquidity and interest rates position in the domestic markets. A delegation of bankers led by Indian Bank?s Association (IBA) will meet the RBI top brass to convey their stand on the latest monetary position. Also, they would discuss the action-plan that they expect from the banking regulator.

Basically, bankers don?t see any hike in interest rates in the short term, when the RBI reviews its annual monetary policy, for the fourth quarter in January end.

IBA believes that the interest rates may come down by 25-50 basis points in the medium term.

Speaking to the FE, HN Sinor, chief executive officer, IBA, said, ?We feel that the interest rates will remain stable for the next three months, as there was adequate liquidity in the monetary system and any further rise at this point of time will give way to arbitrage opportunity, which will only increase the inflow of dollars in the country.?

Rather, IBA believes that the interest rate should soften by 25-50 basis points in the medium term, said Sinor.

Highlighting possible signals for the RBI?s credit review, Sinor said, ?They are in both forms, external as well as internal.? While external signals include, balance of payment (BoP) and crude price; the internal signals include, inflation, GDP growth, credit expansion and money supply. Constantly, increasing crude price in the global market, which is responsible for nearly half of the imports happening in the country, was the area of concern, as its burden was yet to be passed on to the customers, said Sinor.

Asked to comment on consolidation in the banking sector, Sinor said that though State Bank of India (SBI) has already taken an initiative in this direction by merging one of its associates, State Bank of Saurashtra. However, he rued over the fact that it was not happening among the public sector banks in the larger way. IBA strongly believes that the consolidation in the state-run banks will be beneficial for the country?s economy in that size and scale and above all, it will give them greater penetration.

Sinor suggested the principle of marriage of equals or simply ?amalgamation? if mergers were to happen in a meaningful manner.