Mumbai: State Bank Chairman OP Bhatt on Saturday said lending rates in the banking system are unlikely to rise at least in the next 3-4 months as hiking rates in a low-demand scenario could hurt banks' margins.
"That (increasing lending rates) may not happen till May-June till the liquidity surplus goes away from the system," OP Bhatt told reporters on the sidelines of an event here.
Bhatt hinted that the State Bank is also unlikely to increase the interest rates for its depositors in the near future.
After the RBI hiked the portion of deposits banks need to park with it for zero interest last month, atleast two banks--HDFC Bank and IDBI Bank--had upped their deposit rates-- a trend that could be followed by other banks in the coming days.
SBI has a liquidity surplus of around Rs 75,000-crore and its maintenance cost had adversely impacted the third quarter numbers the bank.
On base rates, Bhatt said banks have sent a "collective feed back" to RBI, where they have cited some implementation issues, particularly in the priority sector and staff loan segments.
"IBA (Indian banks association) has sent a collective feedback to RBI...it (base rates) makes sense to do...but there are some implementation issues...like in priority sector and staff loans," Bhatt said.
Banks lend at concessional rates to priority sector customers and to their own staff. But the new base rate model, recently announced by the RBI to improve transparency in lending, prevents banks lending below that rate.
Bhatt said SBI is yet to work out their base rate. He added that banks may also request RBI for an extension of the deadline to implement the new model, given the difficulties in the migration.
However, the average yield on advances may move up in the system with the new model, which may partly provide relief to banks, especially given the RBI directive to pay more to savings deposit holders from April, Bhatt said.
He said that the new model of savings deposit interest rate calculation could have an impact of 0.20-0.25 percent on banks' deposit portfolios.
On the credit growth, Bhatt said SBI was confident to achieve a loan growth of 16 per cent in the current fiscal, which could be a possible target for the industry as well given the pick up in demand.
Asked on SBI's growth prospects in Q4 FY10, Bhatt said that the depreciation of bond earnings could claim a negative impact in the last quarter earnings.
PTI
First Published: Sunday, February 21, 2010, 09:15