Speaking to CNBC-TV18, Arun Kaul, General Manager Treasury Finance, Punjab National Bank said the latest WSS figures(weekly statistical supplement) shows the deposit growth at approximately 24%, whereas the credit growth is shown above 22% vis-à-vis 29% last year. "So compared to last year, the credit growth has certainly slowed down," he concludes.

Excerpts from CNBC-TV18's exclusive interview with Arun Kaul:

Q: What would you make of the rally in the bond markets? Do you think there is more headroom? Do you think there are chances even of an auction cancellation given the comfortable finances of the central government?

A: The rally was primarily because the market expected the liquidity to improve in the month of January. We had seen a very tight liquidity in the month of December and with an improvement in January, one has seen a fairly strong bull run. So even today the sentiment is very comfortable. One could see fairly bullish undertones in the bond market but there is a caution. People are worried about possible MSS auctions. We would like to wait and see what steps the RBI takes.

Q: What is your sense of the economy and the lending rates itself? Has the credit offtake kept pace with the kind of deposit growth that banks were exhibiting? Do you see a fall in lending rates in the last quarter if credit growth doesn’t catch up?

A: If you look at the latest WSS figures(weekly statistical supplement), the deposit growth is approximately 23.9% or say 24%, whereas the credit growth has been above 22% vis-à-vis 29% last year. So compared to last year, the credit growth has certainly slowed down. Even this year, we saw very slow credit growth between April-September; but thereafter it has picked up. Although there is some pick-up in credit growth, it is not as robust as last year. Under these conditions, I don’t see any opportunity with the banks to increase lending rates immediately.

Q: Do you see the normal tendency of deposit rates going up towards March 31?

A: No, we have not noticed that even towards the end of December. We did notice a very strong tendency for the banks to raise the cost to deposit last year. If liquidity remains comfortable, then there may not be a need for the banks to go aggressive with deposit rates.