Interest rates may rise from Q2: SBI

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

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

He said money supply is under pressure, but interest rates will remain stable in immediate future.

"(There is) pressure on liquidity, but no immediate pressure on interest rates," Bhatt said.

In its monetary review recently, the RBI asked banks to keep more cash with it, which will shrink money supply by Rs 36,000 crore (Rs 360 billion) from the system.

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

Earlier, the largest private sector lender, ICICI Bank CEO and MD 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.

Bhatt added that its associate bank SBI Indore will be merged into it by March-end.

The government and the SBI Board has already given in-principle approval to the merger. SBI Saurashtra has already been merged into the parent company.