Interest rates in India are not likely to come down in the short to medium term, as the cost of funds is higher, said TS Bhattacharya, managing director of State Bank of India.
The SBI managing director was addressing a seminar organised by the Confederation of Indian Industries (CII) on Wednesday. He said, ?Higher cost of funds is making it difficult for interest rates to come down.?
Commenting on the resource crunch that the bank is facing, Bhattacharya said, ?The boards of each bank decide what percentage of fixed deposit would be treated as long-term liability. The amount at disposal is growing at a much slower pace compared with the growth of the demand.?
According to him, the fund available for long-term loans for large infrastructure projects is growing at a slower rate. He said that even when there is a demand for funding in corporate and infrastructure sectors, the lack of resources for long-term lending is becoming a constraint.
Talking to reporters on the sidelines of the seminar, Bhattacharya said that the proposed rights issue of the SBI would be coming up in the January-March quarter of the current financial year.
Earlier, SBI received a Cabinet approval to its rights issue of shares, which would help it to mobilise capital.
The raising of capital is aimed at funding the business growth of SBI and meet capital requirement norms set out by Basel-II guidelines.
?Right now, one of the major issues is getting capital to keep our loan book growing,? he said.
According to him, the rights issue would help the bank in meeting risk mitigating norms.
