Bankers expect interest rates to remain stable

Bankers expect interest rates to remain stable

New Delhi: Public sector lenders SBI and Canara Bank today said interest rates are expected to remain soft and stable in the near future as inflation is down and there is ample liquidity with the banks.

“Interest rates are expected to remain stable to down," SBI Chairman O P Bhatt told reporters before participating in a meeting of bankers and exporters with Finance Minister P. Chidambaram here.

Interest rates have already eased off a bit, he added.

Canara Bank Chairman and Managing Director M B N Rao, who also heads Indian Banks’ Association, said there is adequate liquidity in the system and with low inflation, interest rates are likely to remain soft and stable.

“Inflation being under control, I do not see any reason for interest rate to go up," he said.

However, high global oil prices are a cause for concern and should be watched carefully, Rao said.

He said lower interest rates internationally will increase the funds flowing into India, adding to the liquidity.

On credit offtake he said, credit has picked up in October and the offtake was likely to be of the order anticipated by the RBI in its credit policy.

Rao further said there has been brisk demand for credit from agriculture and other sectors of the economy.

The net interest rate margin (NIM) was also expected to improve as a result of increase in credit offtake, the Canara Bank CMD said, adding that NIM, which was above 3% in 2006-07, came down to below that level in the initial months of the current fiscal. “It has now started improving."

Canara Bank was also in a process of rebalancing its assets to improve NIM, which is an important parameter to determine the profitability of a bank.