"We will review interest rates after watching the impact of RBI decision on liquidity. Finance Minister P Chidambaram has also said he will talk to PSU banks tomorrow," Kamath, who is also the president of CII, told PTI after meeting Chidambaram along with heads of FICCI and Assocham.
Confident that the economy would still grow by eight per cent this year, he said this would require liquidity, high morale and containment of inflation and "the government is willing to act 24X7 earnestly". He said, "as a banker I say this... the government cannot actually on its part lower rates. The banks have to lower interest rates."
Kamath, Ficci president Rajeev Chandrasekhar and Assocham chief Sajjan Jindal met Chidambaram, shortwhile after the Prime Minister Manmohan Singh's meeting with the industrialists to take forward the growth agenda.
Emerging from the meeting, Jindal said, "Finance Minster has assured that there would be enough liquidity while containing inflation...there will be enough liquidity to see that demand flow starts."
Pointing out that there is a need for a steep cut in interest rates if the country has to achieve a growth of 8 per cent, Kamath said "it is the interest rate that will drive this growth".
Exuding confidence that there would be more RBI measures to pump in additional money into the system, Jindal said, "Without monetary measures, I don't think liquidity can be generated. Probably in next couple of days, they (RBI) are going to watch the situation and based on this they will take next steps."
Brushing aside the issue of job cuts by the industry and financial sectors, Kamath said high growth would require more jobs.
Referring to the host of measures announced by the RBI to inject liquidity on Saturday, Kamath said "the signals are very clear, there has been CRR cut and easing of liquidity ...lending and deposit rates would react to increased liquidity."
"I think we need to give a few days to see what impact it would have. It has to happen naturally," he said.
To inject liquidity, the Reserve Bank slashed mandatory cash, that banks have to maintain with the central bank, and reduced statutory liquidity ratio (SLR), the amount which banks have to invest in government securities.
In addition to 100 basis points cuts in CRR and SLR, the central bank also reduced short-term lending (repo) rate by 50 basis points to 7.5 per cent giving signals to the banks to soften interest rates.
Following reduction in the key reserve ratios, CRR would come down to 5.5 per cent while SLR would be 24 per cent.
Measures taken by RBI would infuse liquidity to the tune of Rs 85,000 crore (Rs 850 billion) in the cash starved banking system. This is in addition to Rs 1,85,000 crore (Rs 1,850 billion) already already injected by the apex bank in the last month.
Two major public sector lenders, PNB and Union Bank of India have already lowered the benchmark prime lending rate by 50 basis points to 13.5 per cent.
