No room for lending rate cut now, says Kamath

No room for lending rate cut now, says Kamath
Business Standard, August 27, 2009, Section II, Page 2

Newswire18 / New Delhi

Banks didn’t have room to further cut lending rates as of now and, in fact, they might look at raising them once credit offtake picked up, ICICI Bank’s Chairman KV Kamath said today.

“There is no scope (for more rate cuts) left any more,” Kamath told reporters on the sidelines of an event here.

“Credit offtake is expected to pick up (in October-March), and then there will be a case for rates to harden,” he said in reply to a question.

According to him, the home loan segment has shown a recovery. “I will say home loans are better, and are back to where they were last year,” he said.

On Tuesday, OP Bhatt, head of the country’s largest lender State Bank of India, had said the bank’s new 8 per cent home loan scheme had evoked an “excellent” response.

Typically, banks witness lacklustre credit offtake at the beginning of a financial year, which picks up around the festive season post-September.

However, there is concern that a weak monsoon this year may dent rural income and banks’ credit offtake may fall short of the Reserve Bank of India’s (RBI’s) estimate of about 20 per cent growth for 2009-10.

Kamath said it was difficult to say whether RBI would reverse its easy monetary policy stance this financial year.

“There are lot of indicators that need to be seen such as inflation. It’s difficult, therefore, to say whether RBI will change its stance,” he said.

Since October, RBI has cut its benchmark repo rate by 425 basis points (bps), reverse repo by 275 bps and cash reserve ratio by 400 bps in a bid to infuse liquidity and fuel demand.