Interest rates may go up 75-100 bps in 2011: Uday Kotak

Private lender Kotak Mahindra Bank today said it expects interest rates to go up by 75 to 100 basis points (bps) during the calendar year 2011.

"We think interest rates are still on their way up. We see a movement of anywhere between 75 and 100 basis point from here in calendar 2011," said Executive Vice-Chairman and Managing Director Uday Kotak.

Talking about pressures on net interest margins (NIM) for the banking industry, he said, "There is cost of money and types of lending, if you are a good. Building a sustainable business, super normal net interest margins will come down and very low interet margins are not sustainable."

 

He said margin returns would depend largely on how a bank managed its risk returns and proper management over a time would ensure a fair return on capital.

The analyst community has become focussed on NIM, but it is necessary to also look at operating cost and credit costs and look at the equation of all the three factors, he said.

On inflation, he said "by March we could see inflation about 7.5% and into next year we are estimating an average of around 6-6.5% average inflation."

On Budget highlight for next year, he said, "My view is the key focus in the Budget is got to be controlling fiscal deficit and if India gets its three deficits right--India will prosper even more, will see more balanced growth, inclusive growth in India. I would love to see next year's fiscal deficit somewhere in the 4-4.5% and not beyond that...Much closer to four side rather than five side".