Interest rate increase not round the corner: Bankers

Banks prepared to wait and watch, as the policy is in sync with market expectations. Terming the third quarter monetary policy review as judicious and in sync with expectations, bankers on Tuesday said although the scenario presented a case for a rise in interest rates, it might not just be round the corner.   “For a long time, there has been an upward bias in interest rates and we have seen that getting translated into actual rates increases, both on the deposit and the advances’ side. However, there is always a little lag between the transmission signal and the actual event,” said State Bank of India Chairman O P Bhatt. The asset liability committee (Alco) of the bank would meet shortly to discuss the issue, he said.  “Clearly, there is a bridge between deposit and credit growth and that’s the structural factor responsible for liquidity deficit...they (banks) must increase their deposits and restrain their credit. The credit and deposit growth has to be aligned,” RBI Governor D Subbarao said in the post-policy press meet. Union Bank Chairman and Managing Director M V Nair said though the key concern had been deposit mobilisation, attaining RBI’s projection of 18 per cent growth in deposits during the current financial year was possible. “Most banks have increased the deposit rates lately and the deposit growth has also moved up. Whether it will touch 18 per cent, I think it is possible. Otherwise, we may have to necessarily pass on the rise and increase the deposit rate which, in turn, may impact the base rate,” he said. Echoing Nair, Punjab National Bank’s Chairman and Managing Director K R Kamath added there was a need to balance credit and deposit growth in the coming quarters. “Inflation is a concern, interest rates have an upward bias. These are all indicative of things. There is a case for interest rate increase, both on the deposit and lending side, but when and how, the market will decide,” he added.