Interest rates may go up with pick up in bank credit: ICICI

New Delhi: ICICI Bank, the country's largest private sector bank, today said there was pressure on interest rates following RBI intervention to check inflation and that loans may cost more with pick up in credit, reports PTI.

"There is an upward bias on interest rate. How they move up... to what extent they move up and at what rate they move up... will partly depend on how credit growth rate in the system picks up," ICICI Bank CEO and managing director Chanda Kochhar told PTI in an interview here.

The Reserve Bank of India (RBI) had earlier this month raised key rates at which it lends (repo) and borrows (reverse repo) short-term capital from commercial banks by 25 basis points in its bid to tame inflation.

"Clearly, the fact is that the liquidity is being managed tightly. The fact is that deposit cost have gone up and therefore as credit demand picks up there would be upward bias on interest rate," she said.

Asked if there is pressure on liquidity, she said, "There were some periods last year where we had excess liquidity. All that has gone. We are tightly managing liquidity."

Liquidity had also come under pressure owing to the huge public issue of Coal India Ltd a few weeks ago. Besides, a surge in spending during the festival season also put pressure on liquidity.

State Bank of India (SBI) chairman OP Bhatt too had said that interest rates were under pressure and might push up the rates.

"Interest rates have a slightly upward bias... (due to) liquidity combined with some more credit offtake, which is going to take place. So these two together may push up interest rates," Mr Bhatt had said.

Punjab National Bank (PNB) chairman and managing director K R Kamath too had said recently that banks might have to raise deposit rates to garner savings to meet the credit growth.

Increase in deposit rate raises cost of funds, eventually translating into higher lending rates.

RBI in its mid-year credit policy review earlier in the month raised the key short-term lending (repo) and borrowing (reverse-repo) rates by 25 basis points to 6.25% and 5.25% respectively to contain inflationary expectations. The central bank injects liquidity through repo operations and absorbs it through reverse repo.

To ease pressure on the banking system, RBI recently announced special liquidity easing measures, allowing banks to dip into their SLR (statutory liquidity reserve) portfolio by 1%.

According to the RBI's special measures, banks would be able to avail of more funds under the liquidity adjustment facility (LAF) for up to 1% more on their deposits.

"For any shortfall in maintenance of statutory liquidity ratio (SLR) between 9th November and 16th December, arising out of availment of this facility, banks may seek waiver of penal interest purely as an ad hoc, temporary measure," RBI had said in a statement.


Govt not considering diesel price decontrol: Deora

New Delhi: The government is not considering freeing diesel pricing from its control yet, reports PTI quoting oil minister Murli Deora.

"Currently, there is no proposal under consideration to fully decontrol the price of diesel," Mr Deora said in a written reply to a question in the Rajya Sabha.

State-owned Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation sell diesel at a rate which is Rs2.62 per litre below its imported cost, he said.

The government had, on 26th June, decided to give public sector oil firms freedom to price petrol and diesel in line with cost. However, while petrol pricing was freed with immediate effect, for diesel it was stated that complete decontrol will be done in stages.

Mr Deora said the move resulted in price of petrol going up by Rs3.50 a litre in Delhi.

Besides, the government decided to raise the diesel price by an ad-hoc Rs2 per litre even though the difference between the domestic retail price and imported cost of the fuel was almost twice that.

Since then, diesel rates have not been changed, Mr Deora said, without saying as to when diesel pricing will be freed completely.

Meanwhile, petrol price has risen by Rs1.48 per litre on top of the 26th June increase, he said.

Mr Deora said that for the current fiscal, the public sector oil marketing companies were projected to lose Rs72,000 crore in revenues on selling petrol, diesel, domestic LPG and kerosene below cost.

But after the 26th June decision, when kerosene price was raised by Rs3 per a litre and LPG rates went up by Rs35 per cylinder, the projected revenue loss has come down to Rs53,000 crore, provided crude oil (raw material for making these products) stays around $75 per barrel, Mr Deora added.

"However, the OMCs' actual under-recovery (revenue loss) will depend upon the movement of international oil prices during the current financial year," he said.


NTPC asks MOEF to remove Dulanga block from ‘no go’ list

New Delhi: State-run NTPC has requested the ministry of environment and forests (MOEF) to remove the Dulanga coal block in Orissa from the list of "no go' areas where mining activities are prohibited, reports PTI.

"Only one of the coal blocks (Dulanga in Orissa) allotted to us has gone into the no-go area... We have taken it up with the MOEF," NTPC CMD Arup Roy Chowdhury told reporters here.

NTPC is optimistic about getting the coal block back. "We are hopeful we would get it very soon," Mr Chowdhury said.

'No-go' areas are zones where the MOEF has prohibited coal mining, citing environmental concerns.

The company said planned investment and development activities in the block have been delayed due to the indicative categorisation of the area as a 'no-go' zone by the MOEF.

NTPC is currently developing the Pakri Barwadih, Chatti Bariatu, Kerandari and Talaipalli coal blocks in Jharkhand, in addition to the Brahmani & Chichro Patsimal mines in Orissa.

The company is also scouting for overseas coal properties and has zeroed in on countries like Australia, Mozambique and Indonesia.


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