Rates have peaked, says SBI chief

Lending rates in the country appear to have peaked considering the tight liquidity situation and a stable inflation rate, State Bank of India Chairman O P Bhatt said today.

“Liquidity is tight and inflation is expected to hover around the current levels, if not come down. Considering these two factors, I think the lending rates set by the Reserve Bank of India have peaked,” Bhatt told reporters on the sidelines of a seminar on north-eastern states.

He, however, said interest rates charged by banks from borrowers may vary depending on various business considerations.

Bhatt expressed hope the liquidity crunch may ease on its own as the government injects funds to pay for pay hikes as per the Sixth Pay Commission recommendations.

“Else the RBI could intervene. They have a number of measures to ease liquidity. We do not know which one of these measures they will employ when the need comes,” he said.

Reacting to suggestions that financial crisis in the West could be an opportunity for Indian banks to expand business there, Bhatt said his bank does not plan a major expansion overseas any time soon.

“Many people are saying so. But a sudden expansion in those markets could be risky,” he said.