SBI hints that lending rates may rise from Q2 next fiscal

On Tuesday, SBI hinted that lending rates may rise from the second quarter of fiscal 2010-11, even though there is no immediate pressure on interest rates

The country's largest lender State Bank of India (SBI) on Tuesday hinted that lending rates may rise from the second quarter of fiscal 2010-11, even though there is no immediate pressure on interest rates, reports PTI.

"So far as bank lending rates are concerned, I do not expect lending rates going up before May-June," SBI chairman OP Bhatt told reporters in New Delhi.

He said that money supply is under pressure, but interest rates will remain stable in the immediate future. “There is pressure on liquidity, but no immediate pressure on interest rates," Mr Bhatt said.

In its monetary review recently, the RBI asked banks to keep more cash with it, which will shrink money supply by Rs36,000 crore from the system.

The apex bank's move to hike Cash Reserve Ratio (CRR), the portion of deposits banks keep in cash with the central bank, by 75 basis points to 5.75% will come into effect from 13th February in two tranches.

Earlier, the largest private sector lender, ICICI Bank chief executive officer and managing director Chanda Kochhar had also said that there would be upward pressure on interest rates from the second quarter of this fiscal, because demand for investment would increase.

Mr Bhatt added that its associate bank SBI Indore will be merged into it by March-end. The government and the SBI Board have already given in-principle approval to the merger. SBI Saurashtra has already been merged into the parent company.

Mr Bhatt also said that the SBI sees loan expansion at the rate of 16%-18% this fiscal. "We are already at 17%," he said.

The RBI has also projected credit expansion target at 16%-18% for this fiscal.

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