Home loans and consumer goods loans are likely to remain high as the Reserve Bank of India kept its key policy rates unchanged during its Monetary Policy review on Tuesday.
While some bankers felt that this stance was expected, hopes of a few for a marginal cut in both the policy rates and cash reserve ratio have been belied.
"As expected, the RBI has maintained the status quo as far as rates and CRR are concerned. The RBI's stance overall is on price stability and liquidity management," Indian Banks' Association's chief executive H N Sinor said.
As in the past, the apex bank has given weightage to domestic factors. "By maintaining status quo, the RBI has signalled that there is still a serious inflationary risk due to high global oil prices as well inflated food and metal prices," Bank of Baroda's chief economist Rupa Rege Nitsure said.
While a softening of interest rates does not appear likely in the short-term, "the RBI has signalled a steady rate regime with a slightly downward bias," IDBI Capital's managing director and CEO Sushil Muhnot said.
According to him, any reduction in rates could likely happen around end-April or beginning-May. "A lot of high-cost deposit schemes of banks will mature by March after which pressure on cost of funds for them will reduce. There could be a softening of rates around April-May," Nitsure said.
Sinor felt that going forward, one needed to watch the happenings in the US as a further cut in rates there by the Federal Reserve could further widen the interest rate differences between the two countries.
"Liquidity is even now on the higher side and a further Fed cut has the potential to bring in greater capital inflows. Then the RBI could reduce its rates," he said.
"If the Fed cut its rates further, then the RBI might not wait for the next monetary review -- it might effect a rate cut in-between," Sinor said.
Bankers, had, through the last week, opined that the RBI was likely to maintain status quo. Two public sector bank chiefs, M V Nair of Union Bank and T S Narayanasami of Bank of India, had said that they did not expect any rate cuts this time around.
A few bankers, while expressing the view that there was a case for a marginal rate cut, had said the RBI might not effect a cut immediately. According to them, some stimulus was needed to boost growth in sectors like manufacturing, auto and two-wheeler segments which had begun experiencing a slowdown.
"There is a slowdown in the consumer durables segment but I feel it will be short-lived. With the economy growing at 8 per cent-plus, there has been a decent income generation. The slowdown is cyclical and I feel growth will once more pick-up in Q1 FY 09," Nitsure said.
After the announcement of the monetary policy by RBI today, Punjab National Bank's Executive Director J M Garg said banks are unlikely to tinker with lending and deposit rates immediately.
Till March interest rates are likely to remain stable. Possibly in the first quarter of next financial year, there could be some downward pressure, he added.
