Demonetisation: Interest rates to come down by 1% over 6 mnths, says Kamath

Moneycontrol BureauAt a time when the cash ban move is receiving mixed reviews, former ICICI Bank Chairman KV Kamath says that only a courageous leader could have taken this step. He is also optimistic about lenders and says the demonetisation impact will help in recapitalising banks. He is also of the view that interest rates should decline by as much as 100 basis points over a six-month period.In an interview to Economic Times, Kamath said that the flood of liquidity will result in lower rates and that will lead to gains in banks' bond portfolios running into lakhs of crores of rupees. "There was Rs 100,000 crore profit that happened in the last quarter with treasuries moving down by around 70 basis points, this is a number that I have not seen before in my career," said Kamath. He also lists down some of the benefits that the currency ban wil deliver-- a possible windfall of Rs 2.5 lakh crore for the government- lower interest rate regime for a prolonged period - better tax compliance-recapitalisation of battered state-run banks 'Go cashless' and 'go digital' are the two mantras that the government is encouraging people to adopt and Kamath supporting the mantras says, digital transactions will help the government track the flow of funds through big data analytics and the amount of currency in circulation would be compressed substantially.The most important issue the demonetisation drive addresses is corruption in the country, said Kamath.