Bankers see stability in interest rates

State-run banks, State Bank of India and Canara Bank, today said interest rates are expected to remain stable to soft in the near future as there is ample liquidity in the system and inflation is under control.

"Interest rates are expected to remain stable to down," SBI Chairman O P Bhatt told reporters before participating in a meeting of bankers and exporters with Finance Minister P Chidambaram. Interest rates have already eased off a bit, he added.

Canara Bank Chairman and Managing Director M B N Rao, who also heads Indian Banks' Association, said there is adequate liquidity in the system and with low inflation, interest rates are likely to remain soft and stable.

"Interst rate scenario will be stable or low. Inflation being under control, I do not see any reason for interest rates to go up. But one should watch the high global crude oil price which is touching $100 per barrel," Rao said.

He said lower interest rates internationally would increase the funds flowing into India, adding to the liquidity. "The impact of lower interest rates abroad will also be felt in India. It is a matter of supply and demand," he said.

On credit offtake he said, "Credit has picked up in October and the offtake is likely to be as anticipated by the RBI in its credit policy."

Rao also held that the net interest rate margin (NIM) for Canara Bank is also expected to improve as a result of increase in credit offtake. He said that NIM, which was above 3 per cent in 2006-07, came down to below that level in the initial months of the current fiscal.

"It has now started improving." Canara Bank is also in a process of rebalancing its assets to improve NIM, which is an important parameter to determine the profitability of a bank.