Interest Rates Have Bottomed Out: Khan

The interest rates have bottomed out and are not expected to rise at least till September. This was the view expressed by S H Khan, CMD, Industrial Development Bank of India (IDBI), when asked on the issue of interest rates.

"The outlook for investment climate during 1997-98 is expected to be better following improved liquidity conditions which has imparted downward trend in interest rates," said Khan. He said that they were satisfied by the response to their offer to privately placed bonds at 13.50 per cent. While market reports suggest that the private placement of the IDBI omnibonds has run into rough weather because other issuers were queering its pitch by offering higher rates, Khan maintained that this was not necessarily true.

 

The Rs 500-crore IDBI issue has managed to raise only Rs 325 crore. While IDBI has a greenshoe option for Rs 500 crore, it is unlikely that an eventuality will arise. IDBI officials were evasive on whether they will have to revise the rates upwards on these bonds.

Merchant bankers point out that while the AAA rated corporates are being forced to offer at least 14.50 per cent, IDBI could offer slightly lower rates. However, the 13.50 per cent that IDBI is offering is a bit too much on the lower side.

The view expressed by Khan that interest rates have bottomed out essentially implies that interest rates are expected to move up. IDBI will have a relook at the interest rates it will offer once the private placement closes on July 4.