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The Reserve Bank of India's (RBI) steps to curb volatility in foreign exchange rate may have tightened liquidity but the measures are unlikely to lead to an increase in banks' lending rates, Pratip Chaudhuri, chairman of State Bank of India (SBI), said today.
"These (RBI steps) are absolutely temporary measures and should not have a long-term impact," Chaudhuri told reporters after meeting the finance minister P Chidambaram here today.
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"Banks' deposit and loan rates follow a different dynamics. Yes, there is tightness in liquidity, (but) many people are encashing their investments in liquid mutual funds and coming to banks...I don't think immediately there will be any pressure on rates (to go up)," he added.
SBI has received around Rs 5,000-6,000 crore in the last few days as redemption proceeds of liquid mutual funds. Chaudhuri said if RBI had not taken the measures rupee may have depreciated even further.
He also said the central and state governments are finding it difficult to make any fresh bond issuances. "The bond market is dead," he said. Bankers today met Chidambaram to review the stalled projects in eastern India.
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