A recent press report said that top bankers have told the Reserve Bank of India that it was time to take a break from its monetary tightening cycle.
Reports said that the bankers told the RBI at the pre-monetary policy review consultation meeting that its hike in short-term interest to control inflation has muted credit growth and has added pressure on the asset quality front.
Mr. M.D. Mallya, Chairman, Indian Banks’ Association (IBA) said that the credit growth was not noteworthy and that asset quality pressures were showing up in the textile and steel sectors in the backdrop of rising interest rates. He said that the average base rates of banks’ have increased by 275 basis points since July 1, 2010 to around 10.75 per cent now. He said that the banks will not be able to lend below this rate.
Mr. Mallya said that banks were positive about meeting the RBI’s year-end credit growth target of 18 per cent.
The other bankers took part in the meeting were Mr. Pratip Chaudhuri, Chairman, State Bank of India, Mr. K.R. Kamath, CMD, Punjab National Bank, Mr. M.V. Nair, CMD, Union Bank of India, Ms. Chanda Kochhar, MD & CEO, ICICI Bank, Mr. Aditya Puri, MD & CEO, HDFC Bank, and Mr. Neeraj Swaroop, Regional Chief Executive – India & South Asia, Standard Chartered Bank.
The RBI has recently hiked key interest rates by 25 basis points, which is its 12th such hike since March, 2010. The hike has made auto loan, home loans and other retail loans more expensive.