Bankers aren?t amused after the government released its data on inflation, which is at a five-year low at 2.97%. Most said the wholesale inflation index was suppressed as it does not reflect the rise in domestic oil prices on account of the soaring global crude oil prices which are near $100 a barrel.
?If you factor the increase on account of fuel prices, inflation should be close to Reserve Bank of India?s targeted 5.5%,? said a senior official of an oil marketing and refining government company.
The government is likely to let government refiners hike fuel prices partly, but this would not suffice the losses, he added.
Meanwhile, bankers have ruled out any change in interest rates on the lending side. ?The rates are seen stable, but surely not softening on account of the new inflation data,? said a senior official at a state-run bank.
The government bond market, which is highly sensitive and reflects the true picture on domestic rates, remained steady at the previous levels. The ten-year benchmark bond, 7.99% government securities maturing in 2017, was rock steady at 7.9%.
At the Thursday auction of 8.2% bonds maturing in 2022 and the 8.35% of 2036, the RBI cut-off yields were higher than the coupon, at 8.26% and 8.39% respectively. The yields indicate an upward trend and are in tune with market expectations.
Another reason for the interest rates not seen easing is the huge deposit mobilization drive that banks undertook since the beginning of this fiscal year on an assumption that interest rates would rise. These banks are now saddled with high-cost deposits and a slowdown in credit offtake.
?If at all the rates should ease, it should be on the deposit side, but surely not on the lending side,? said a senior banker at a private-owned bank.