With RBI chief Raghuram Rajan blaming banks for high interest rates and not transmitting the money market benefits, top lender SBI countered the charge and said that banks get very little resources from this market. "Banks get very little resources from the money market. For instance, SBI does not have a single CD (Certificate of Deposit) in the market and so to that extent the rates coming down in the money market won't really impact us. Therefore, there is no question of transmission. My resources are deposits and not money market instruments. I have no CDs in the market and so transmission from my side doesn't come in at all," Arundhati Bhattacharya, SBI Chairperson, told reporters at an event here when asked to comment on Rajan's view. She said Governor was talking about the money market where there has been some softening in the rates.
At the press meet after the policy meeting, where he left all key rates unchanged, Rajan blamed banks for the prevailing high interest rates despite a steep fall in money market rates thereby preventing monetary transmission. He also termed India Inc's repeated calls for lower rates as a myopic way of looking at growth-inflation dynamics and asserted that the central bank is all for the "strongest possible growth".
Explaining her view further, Bhattacharya said sentiment is a very important piece in the whole monetary policy framework. "I think there is a lot of liquidity in the system and very little credit demand, so there will be transmission going forward. When there is very little liquidity and also if inflation is high and you are not able to bring down deposits rates, then transmission becomes difficult. But when inflation is low, you can bring down deposit rates, liquidity is ample, credit growth is not great, then transmission is bound to happen," the SBI chief said.
Terming today's monetary policy statement as "pretty dovish," Bhattacharya expressed the hope that low interest rate regime is closer than expected. "The Governor has left the window open which means that it (rate cut) could happen at any point of time. Also the expectations as they have put out...the inflation band from 11% to 4%, clearly, the expectations are disinflationary and so they are also convinced that the downward trend is entrenched," Bhattacharya said.
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