Bankers want a break from monetary tightening measures

By | August 20, 2011

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.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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