The Reserve Bank of India (RBI) left interest rates on hold on Friday, finally pausing the monetary tightening cycle that had seen it raise rates 13 times since March 2010. The RBI kept its policy repo rate at 8.5% and cash reserve ratio (CRR) at 6%.

Post policy, a couple of big bankers indicated that more than 18% credit growth for this fiscal year looks difficult. Some of them even mentioned that the credit growth would be about 16% for the industry. However, N Kamakodi, managing director and chief executive officer of City Union Bank pointed out that that its growth rate target is 25% for this year.

Talking about the rates, Kamakodi indicated that the rates would decrease only in the second quarter next year or only after June 30. He expects the inflation to come closer to 7% by March so that the RBI can comfortably take a call.

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Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: What’s your assessment of the bankers' view?

A: I agree to what they say about the overall growth rate of the system. Our bank had consistently grown about 5-6% over and above the growth rate of the system. Our growth rate target is 25% for this year. The overall systemic growth rate would be around 50 to 70 basis point and the industry level growth target would be below that for this year.

Q: The RBI governor said that there is some considerable risk to the downside, which has increased. What’s the sense you are getting now? We have seen the pause now. By when could we see a reversal or cut in interest rates?

A: We have to live with the current higher interest rate scenario at least for another two quarters. Only in the second quarter, we can expect the rate to decrease. Even though the inflation numbers have not come down below 9%, still the downward direction is quite visible.

The expectations are that it will come closer to 7% by March and may be 1-2% beyond that could give comfort to the central bank to take a call.

With higher interest rate scenario, global uncertainties and the fluctuations in dollars associated with the oil pressures, we feel that the next two-three quarters might be tougher in a sense that the entire system will face the heat. We can expect reversal of the rates not before Q2. It should be after June 30.

Q: Are you disappointed that the CRR was not cut? If it comes through sometimes soon, how much money would it open up for you?

A: We expected the status quo to be maintained. When so many other factors are acting, the decision to keep things at the current level is definitely commendable. Liquidity can be always managed through OMO.

When the comfort zone of Reserve Bank is at 1% of the systemic deposits, which is around Rs 50,000 crore vis-à-vis Rs 50 lakh crore approximately of the total advances of the system and the borrower is above Rs 1 lakh crore, the liquidity has to be managed through LAF.

We don’t have any option, but to go for another four to five months before we see the reversal of interest rate and subsequent growth prospects.