'Loan rates not likely to decline'

Interest rates for the short- to medium-term lending are not likely to come down for the time being, said T S Bhattacharyya, the managing director of State Bank of India.

"The resources for the long-term lending are growing very slowly and in addition to this, the cost of funds is also on the rise, so there is no likelihood of interest rate easing out for the short- and medium-term loans as of now," Bhattacharyya said.

Talking to the media on the sidelines of a seminar organised by the Confederation of Indian Industry (CII), Bhattacharyya also added that raising funds through deposits from non-resident Indians were drying up due to the appreciation of the rupee against the dollar.

"The lack of resources for long-term lending is acting as a constraint against the lending rates," he said.

The banks had to earn enough money from the corporate and industrial sectors to cover up for the subsidised rates and the regulatory compliances, he said.

"The cost expectation is linked with the decision of the regulator along with the ability of the banks to reduce cost," Bhattacharyya said.

Bhattacharyya also claimed that there had been a considerable rise in the demand for credit in the industrial infrastructure sector, particularly for steel and power plant units.

However, the chairman sounded concerned regarding the sustainability of small-sized steel plants.

"The prices that they are getting today would not be there every time and hence an organised approach is needed for their survival for they would suffer individually in the long run," he said.