Interest rates will be stable, for now

The banking regulator, in its mid term review of the annual policy statement, had asked banks to cut lending rates by rationalising their deposit rates.  RBI has also expressed its concern about the disproportionate disbursal of credit as most banks parked their funds in government securities and other debt market instruments.  But, most banks seem to be in no immediate hurry to slash both deposit and lending rates.  Deposit rates are a sticky subject for public sector banks. Bank chiefs have submitted performance targets including that for the business (advances plus deposits) at the beginning of the year (2007-08).  These targets have not been revised. With credit offtake slowing down, the only way they can meet their business goal is by garnering deposits. Hence, a deposit rate cut by public sector banks seems unlikely.