NEW DELHI: For now, bankers will stand by depositors, even as finance minister P Chidambaram asked banks to lower deposit rates so that lending rates for the industry could soften, keeping in view the lessening demand. Industrialists from sectors such as auto and paper that had witnessed a slowdown, appealed to banks to soften interest rates to boost demand.
However, bankers seemed to be in no mood to accommodate the industry and said they will have to factor in their cost of funds since both retail and corporate savers were important.
Worried about a lacklustre growth in manufacturing, Mr Chidambaram on Friday met key industrialists and select bankers to review the situation. He asked bankers to ensure that interest rates in the economy do not constrict investment and boost demand. Market leaders from companies such as Tata Motors, Hero Honda and Ballarpur Industries attended the meeting.
It is understood that he asked the banking biggies, both State Bank of India and ICICI Bank, to consider lowering their deposit rates. Both SBI and ICICI Bank maintained that deposit rates were unlikely to come down and would remain stable. Banks are waiting for cues from the monetary policy review scheduled later this month.
CEO of ICICI Bank, KV Kamath, said, "Both retail and corporate savers are important to us. We will act according to the sentiment."
SBI chairman OP Bhatt said, "Deposits are important to us. It is our raw material. We will take a call based on various scenarios. We cannot cut rates unilaterally, and be out of sync with the market. The Asset Liability Committee (ALCO) of the bank meets every week. We will factor in today's discussions in the ALCO meeting."
Maruti Suzuki managing director Jagdish Khattar said the finance minister has asked bankers to have a relook at interest rates to stimulate demand. Everybody understands there is a problem and it has to be rectified, he said.
The finance minister asked bankers to ensure that the positive business environment and current buoyancy in growth continue. The minister enquired as to why certain sectors were not performing as well as others. The minister is expected to meet representatives from other sectors in the next few days.
The index of industrial production (IIP) registered a growth of 7.2% in July this year compared with 13.2% a year ago, signalling a nine-month low in the index. The manufacturing sector growth slowed down to 7.2% in July compared with a growth of 9.8% in June and 11.7% in May this year. According to an HSBC report, manufacturing growth is expected to fall to 4% in the near future.
Saturday, October 6, 2007
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