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| Interest rates to go up, says ICICI Bank chief |
| Press Trust of India / New Delhi Aug 20, 2009, 14:49 IST |
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The country's largest private sector lender ICICI Bank today said lending rates will start going up any time now, quite contrary to the SBI Chairman's projection that borrowers can breathe easy till Diwali.
"I really believe that interest rates are not going to go down from here. Gradually they would go up. When? ...Would really depend on how fast the credit growth takes place," ICICI Bank CEO and Managing Director Chanda Kochhar said.
Her statement comes a day after SBI Chairman O P Bhatt said that rates would not rise till Diwali and may even soften by 25-50 basis points before the busy season in October.
In April, ICICI Bank was the first to reduce lending and deposit rates by 50 basis points after announcement of the annual credit policy by the Reserve Bank of India.
Replying to questions on impact of the large government borrowing on the financial system, Kochhar said, "The amount is large. I don't think that amount is small. It does have its own impact on interest rates and financial system... I am sure there is a thought behind it."
In order to step up expenditure to stimulate the economy reeling under the impact of the global financial meltdown, the government decided to raise Rs 4.51 lakh crore through market borrowings this fiscal, up from Rs 3.1 lakh crore in 2008-09.
Expressing concern over the high government borrowing, Reserve Bank Governor D Subbarao had recently said that it was impairing the ability of the central bank to further lower the interest rates through monetary measures.
Pointing out that there is more clarity on the market borrowing programme of the government, Kochhar said, "What will happen to the interest rates... Is more dependent on how the credit growth picks up. As far as the government borrowing is concerned, now that there is so much clarity. The market has already built in whatever the impact will be."
The centre has decided to borrow 70 per cent of its requirement during the first half, she said, adding that the important message that the government gave out was that it would bridge the revenue-expenditure shortfall, if any, by raising taxes and not through more borrowings.
Moreover, she added, "The private sector plans depend not so much on government borrowing. Their plans depend more on their own performance. And their belief... To raise debt and equity."
The data for the last three months indicate improvement in capacity utilisation by India Inc, Kochhar, ranked the world's 20th Most Powerful Woman by Forbes, said and added that "since... The commodity price correction... These people are coming back to restart their projects".
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