Faced with slowdown in credit demand, Indian bankers on Monday urged the Reserve Bank of India to hold the policy rates at the current levels, and sought a clearer picture on the future interest rates.
“Lenders have suggested to the central bank to pause its rate hike cycle and also urged for a clear forward looking statement on interest rates at the policy review next week,” said K Ramakrishnan, chief executive officer, Indian Banks’ Associations (IBA).
He was talking to the media after the customary pre-policy meeting with deputy governor Subir Gokarn, where leading bankers shared views on the interest rates, credit and deposit growth, overall economic growth, stressed assets and other macroeconomic data. The first quarter policy review is scheduled on July 26.
“New projects are not coming in, and therefore, there could be a sort of slowdown going forward as far as the overall credit demand and credit offtake is concerned,” said MD Mallya, IBA chairman and CMD, Bank of Baroda.
Since March 2010, the central bank has hiked repo rate (the rate at which the RBI lends funds to banks) 10 times by a total of 275 basis points or 2.75 percentage points, in order to tame inflation. Repo rate currently stands at 7.5%.
Bankers said they have not yet decided to revise credit growth target. “It is too early to revise credit growth target,” said Alok Mishra, chairman, Bank of India.
The bankers also urged RBI to delay the deregulation of interest rates on saving bank accounts. “It is not the appropriate time,” said Mallya.