Interest rate cycle may have peaked, says SBI head

NEW DELHI: State Bank of India chairman O P Bhatt on Tuesday said the domestic interest rate cycle may have peaked. “The interest rate cycle may have peaked or near its peak,” Bhatt told reporters on the sidelines of a conference of Indian Diaspora.

Bhatt said interest rates were likely to remain stable for some time now.

Indian banks are seeking to attract more funds as an expanding economy fuels demand for loans from companies and individuals, the nation’s largest lender said.

“As of now, liquidity is slightly tight... Reserve Bank of India has the instruments to take care (of liquidity),” Bhatt said. The central bank, for instance, injects short-term liquidity into the system via its repo window. Bhatt sees State Bank of India’s credit growth at around 25% and deposit growth at 16-17% during the current financial year to March. He said the recent rise in interest rates had lead to a slight slowdown in loan growth.

State Bank and other lenders have been raising deposit rates to attract more funds for lending. The bank, which has 100 million customers, last week raised interest rates to attract funds from big depositors.

Bank loans in India rose 29% as of December 29 from a year earlier, following an average of more than 35% in each of the previous two financial years, according to central bank data.

India’s $775 billion economy, which expanded 9.1% in the first half to September.