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| Lending rates unlikely to rise, says Pranab |
| BS Reporter / New Delhi Aug 15, 2010, 00:44 IST |
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 Even as public sector banks have started increasing prime lending rates (PLR), Finance Minister Pranab Mukherjee today said the hike in policy rates by the Reserve Bank of India (RBI) was not expected to result in an increase in lending rates.
Asked whether tightening of monetary policy would affect interest rates, Mukherjee said: “No, I don’t think so. Banks are fully aware of it and they have taken note of it and have adjusted their plans accordingly.”
The finance minister, however, said he had not given any directions to the banks on interest rates, as that was an area of RBI. He was addressing the media after meeting the chiefs of public sector banks.
Some banks said lending rates were expected to go up and their asset liability committees would take a call. Bank of Baroda, Corporation Bank, Oriental Bank of Commerce, Union Bank and IDBI Bank have already increased their PLR by 50 basis points each.
“I think there is an upward bias (on interest rates),” said OP Bhatt, chairman and managing director of the country’s largest lender, State Bank of India (SBI). The bank has not touched its BPLR yet. He said most banks had raised interest rates in the range of 25-50 basis points, with the highest raise of 75 basis points being affected by New Delhi-based Punjab National Bank. “I would put it (hike in interest rates by PNB) at the extreme end. It cannot be more than that. It has to be less than that,” Bhatt added.
Bank of Maharashtra CMD Allen Pereira said any further increase in interest rates would depend on liquidity and credit offtake in the coming months.
Mukherjee asked banks to accelerate the financial deepening, else the full potential of the Indian economy would be constrained. He said in order to meet the needs of one of the fastest growing economies of the world, banks would have to constantly augment their capital base. He asked banks to focus on financial inclusion to reach out to those who were still outside the banking network by using new technologies and business correspondents.
Mukherjee asked public sector banks to ensure convergence of Indian Accounting Standards with International Financial Reporting Standards by 2012, although banks are required to adopt these by 2013.
“However, perhaps the most daunting task for banks in my opinion is going to be management of human resources. PSBs need to fundamentally strengthen institutional skill levels, especially in sales and marketing, service operations, risk management and the overall organisational performance ethic,” he added.
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