In a meeting with Reserve Bank of India Deputy Governor Rakesh Mohan today, bankers expressed concerns that interest rates had not shown signs of softening despite ample liquidity and overnight rates being at close to 1 per cent levels. | |
| Banks generally are flush with funds with credit growth slowing sharply by the end of the first quarter of 2007-08. The interbank call money market is witnessing overnight rates below 1 per cent, while the rate at which RBI absorbs overnight liquidity (reverse repo rate) is 6 per cent and its overnight lending rate (repo rate) is at a five-year high of 7.75 per cent. |
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| CEOs of banks including K V Kamath, managing director and CEO of ICICI Bank, Sanjay Nayar, chief executive officer of Citigroup, M B N Rao, chairman and managing director of Canara Bank met the RBI deputy governor ahead of the July 31 monetary policy review. |
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| The bankers talked about the interest rates remaining stubbornly at the higher levels when their views were sought on the prevailing conditions. |
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| "The deputy governor had sought bankers' view on macro issues such as inflation, oil prices, demand for funds from various sectors, deposit mobilisation and interest rate scenario," said H N Sinor, CEO, IBA. |
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| "We continue to see strong credit demand from manufacturing, services and infrastructure sector. However, on the retail side there have been signs of a slowdown except in the auto related loans,'' said one of the bank CEOs who attended the meeting. |
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| Banks have been rebalancing their portfolio with emphasis on flow of credit to the productive sector. Deposits continue to show healthy growth. |
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| The recent Reserve Bank of India data states that credit growth has slowed down to 23.4 per cent as on June 29, 2007, down from 24.6 per cent a week earlier and about 31 per cent a year ago. |
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