The bankers have unanimously agreed not to hike the interest rates for the time being, despite a quarter percentage point hike in the repo rate by Reserve Bank of India in its mid-term review of the credit policy. The repo rate is at which the RBI infuses liquidity in the system. The central bank raised the repo rate to 7.25% but left the reverse repo and bank rates unchanged at 6%.
O.P. Bhat, chairman, State Bank of India, said the current rate of credit growth was not sustainable for the fourth year in a row and liquidity in the banking system was meant for sectors like exports, infrastructure and capital expenditure in the manufacturing sector. He also added that at the moment rates would not be raised.
K.V. Kamath, MD and CEO, ICICI Bank, was also of the view that rates would remain stable for the time being and there was no concern from the market on rates going up. However, V.P. Shetty, chairman of IDBI, felt that in the short term, rates would go up in the aftermath of the repo rate hike, although the stable interest rate environment would not be disturbed in the longer term. None of the bankers felt that there would be any drastic slowing down of credit growth, even as they felt that very high growth momentum might not be maintained.
Some of the bankers indicated that in their annual business budget, the target for annual credit growth had already been brought down to 20%, while others said growth would veer around 25%. Non-food credit growth was 30.5% year on year till mid-October on top of 31.8% growth a year ago.