‘Liquidity is high, thanks to good crop’ | business | Hindustan Times
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‘Liquidity is high, thanks to good crop’

business Updated: Apr 14, 2010 22:20 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times
‘Liquidity is high

Even as the country, grappling with a hardening currency and runaway food prices, looks towards the Reserve Bank of India’s credit policy, due on April 20, the chairman and managing director of Indian Bank, T.M. Bhasin, told Hindustan Times that interest rates typically rise when liquidity dries up.

Excerpts:

Is the liquidity situation as comfortable as it was a few months ago?

This is a lean season for the banking industry... (but) we expect liquidity to remain comfortable for the next three to four months, thanks to the bumper rabi crop, which would ease food inflation and infuse cash into the system.

What do you think would be RBI’s focus in the credit policy? Do you see a rate hike?

For the central bank, controlling inflation will be most crucial.

Would Indian Bank raise lending rates?

As I said, I do not see any major liquidity squeeze in the coming months. So I don’t see any immediate need to do that.

Will the new base rate system would benefit customers?

The system of pricing loans based on the benchmark prime lending rate has been favouring the corporates as most banks have been offering loans at a sub-BPLR level. The new system would end this. However, RBI guideline on pricing credit to several key sectors — including exports and weaker sections among others — is awaited.

Are you ready to implement it?

Yes we are. Once the guideline on the priority sector is issued, things will become completely clear.