Interest rates have bottomed out, say bankers

Interest rates have bottomed out, say bankers
The Hindu Business Line, September 9, 2009, Page 6

To rise gradually on the back of loan growth picking up.

Our Bureau, Mumbai

Bankers appear to agree that interest rates have bottomed out in the economy and could rise in the coming months on the back of loan growth gathering pace.

At a FICCI-IBA conference on global banking, top bankers unanimously aired the view that interest rates would stay at the current levels for now and edge up going forward.

ICICI Bank views

“Lending rates have bottomed out....gradually interest rates will harden...from here on, we will gradually see credit pick-up taking place and then the rates would harden,” said Ms Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank.

Emphasising that in India, growth is backed by domestic consumption and investment demand, she said her bank has seen growth returning in its home and auto loans portfolios in the second quarter due to improving sentiments in the credit market.

“We will continue to focus on home, auto and infrastructure loan segments. We also expect project finance to pick up,” she said.

According to the HSBC India Chairman, Ms Naina Lal Kidwai, “Rates will remain flat for now but can go up by the end of the year. We will have to see how credit off-take shapes up.”

The IDBI Bank Chairman and Managing Director, Mr Yogesh Agarwal, felt that interest rates will rise after Diwali and that the quantum of increase will depend on credit growth.

HDFC Bank opinions

The HDFC Bank Managing Director, Mr Aditya Puri, too averred that the interest rates had bottomed out. “There is more than enough liquidity in the system now and inflation is being watched. Unless there is a RBI action, I don’t see an increase in interest rates. There won’t be that much treasury profit, but our base growth won’t be affected,” Mr Puri said.

The government securities market appears to have already discounted the fact that interest rates will rise. In the last one month, the yield on the benchmark 10-year G-Sec (6.90 per cent GOI 2019), which closed at a yield of 7.37 per cent, has risen by 34 basis points.