Policy rates hiked: Will banks raise lending rates?
Published on Sat, Mar 20, 2010 at 15:12 | Source : CNBC-TV18
Updated at Mon, Mar 22, 2010 at 10:00
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Policy rates hiked: Will banks raise lending rates?
The Reserve Bank of India (RBI) has raised the reverse repo and repo rates by a quarter per cent. On CNBC-TV18, Bank of Baroda Chairman, MD Mallya; Chetan Ahya, Economist, Morgan Stanley, and Nomura's MD and Fixed Income Co-Head Neeraj Gambhir gave their perspective on the RBI's move and how our life changes post the move.
Q: But given the global liquidity, the industry will not have too much of a problem?
Gambhir: We are in a very unique situation right now. Till about 10 years ago, it was only the Japanese economy which used to provide the low cost liquidity for the world. Now, we have at least two which is Japan and US. We have a far higher availability of low-cost liquidity and cheaper sort of funding available in the world.
Given the availability of funding for the Indian economy, I would expect this should not be a big constraint.
Q: Clearly it does not look like the industry is going to be very seriously affected, except perhaps the SME sector later on in the year. Do you think retail credit will fall, do you think consumption will fall at all with a 0.5-1% point rise by the end of FY11?
Ahya: Consumption will definitely moderate in the second half when the rate hikes will get meaningful. But the numbers are just way too robust. Current account-savings account is growing at 40%. If they moderate down to 20%, that is not really an issue.
We will have alternate growth engines coming up. Exports recovery is happening. We will see investments picking up. All in all, growth should still be holding up pretty well.
