'Banks to take cue from RBI policy to decide rates'

Lending rates might move upward in the months ahead as credit growth picks up, but banks may take a cue from the RBI policy before effecting any change in their rate-structure, a top banker today said.

"It (interest rate movements) will depend on the RBI policy. In my view, bank credit will pick up in the months ahead...Rates may move upward," Kotak Mahindra Bank's Vice-Chairman and Managing Director, Uday Kotak told reporters here.

Last week, State Bank of India Chairman, O P Bhatt had said that rates are likely to remain stable till June-end despite inflationary pressures.

RBI, which is slated to announce its quarterly review of the monetary policy of this fiscal on January 29, is widely expected to hike its cash reserve ratio and policy rates to tackle inflation and suck out the excess liquidity from the system.

JM Financial's Chairman & Managing Director, Nimesh Kampani said inflation is the primary concern of policy makers currently, which is a result of supply-side issues.

Policy makers need to adopt fiscal steps to tackle inflation, rather than opting for monetary policy actions, Kampani said.

As the economy recovers from the spillover impact of the financial slowdown, investments will start coming back to the market and syndicated loan volumes may also pick up, Kampani said.

He noted that the number of outbound M&A deals have slowed down considerably on account of the credit crunch that hit the financial markets following the global financial slowdown.