Chidambaram does not expect interest rate hike soon

May 1st, 2008 - 6:44 pm ICT by admin  

A file-photo of P. Chidambaram

New Delhi, May 1 (IANS) In what should sound as a pleasant note for India Inc, Finance Minister P. Chidambaram Thursday said he did not see any hike in interest rates by commercial banks after the recent hikes in cash reserve ratio (CRR) announced by the Reserve Bank of India (RBI) “In the reasonable future, I don’t expect any increase in interest rates by the public sector banks,” Chidambaram said after a meeting with the chief executives of commercial banks here.

“I think the banks are happy that only CRR has been hiked and the other policy rates have been untouched,” the finance minister said, referring to the hike of 74 basis points in CRR, which is the minimum liquidity vis a vis deposits that commercial banks have to maintain.

“Banks don’t expect the CRR hike to impact interest rates.”

With inflation ruling at three-year highs of 7.33 percent for the week ended April 12, the central bank had Tuesday hiked the CRR by 25 basis points when it announced its monetary and credit policy for the current fiscal.

A week before, the apex bank had hiked the CRR by 50 basis points, which was to be implemented in two phases of 25 basis points each.

Some bankers like the chief executive of ICICI Bank, K.V. Kamath, who took over as the president of the Confederation of Indian Industry Thursday, also saw interest rates remaining stable in the near future.

“I think the central bank has taken the right steps to rein in prices. Growth has not been given a go by. I think interest rates will remain stable in the near future,” Kamath told IANS.

“Banks will still have the necessary liquidity to lend and push growth.”

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