SBI chief expects interest rates to be stable
By Joseph Samson
Jul 2, 2010
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The largest lender of the country, State Bank of India expects that the pressure of towering inflation is soon going to ease out along with the pressure put due to rise in fuel prices.

Chairman of the banking major, O P Bhatt said there should be more time given before tightening the interest rates.

Speaking of his views regarding the monetary policy review coming up later this month, he said, "There are two schools of thought- stimulus should not be withdrawn because one doesn't know how sustainable the recovery is. The other school of thought is whether there should be some tightening because of inflation. My own view is it is better to be conservative and wait for some more time. Based on all predictions, inflation will go down despite even the fuel price hike. So, if the economy is growing, let it grow."

Though he said that interest rates should still be kept stable, he added that there is an upward bias to interest rates and it is going to set in sooner or later. "There are several reasons for this-market liquidity is tight and inflation is persistent. But inflation will start going down from next month, monsoon is growing. About liquidity, we don't know. Interest rate won't go down, chances are it will remain stable or there will be some form of upward bias."

Speaking on the bank's decision to extend teaser loans till September end, he said, "We have continued with scheme because cost of funds have gone down considerably and we have also seen a huge growth in CASA. This is why we have been able to come up with base rate of 7.5% and continue with the scheme."


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