Lending, deposit rates likely to remain unchanged: Bankers

RBI has clearly opened the window for rate cuts to begin in the next review in February 2015 or earlier.

Interest rates, both for deposit and lending, are likely to remain static as the Reserve Bank on Tuesday kept the key rate unchanged at its fifth bi-monthly monetary policy review.

"Interest rates are likely to remain unchanged," State Bank of India chairperson Arundhati Bhattacharya told PTI.

Echoing similar views Yes Bank CEO and Managing Director Rana Kapoor said: "Base rate and benchmark prime lending rate are unlikely to see any downward revision at the moment.

“It can happen only after policy rate moderates."

However, he said, there could be some adjustment in interest rate of deposits of long tenure over 3 years.

Some of the banks have done this and some more could do it based on their asset liability position, Kapoor said, adding that a few more banks can make changes in the coming days as system has ample liquidity.

According to United Bank of India Executive Director Deepak Narang, margins of banks are already under pressure because of high non-performing assets level.

"So, I don't see a cut in the interest rate at the moment," he said.

RBI Governor Raghuram Rajan on Tuesday kept interest rate unchanged, saying that a shift in stance is 'premature' but hinted that a cut may come early next year if inflation continues to ease and government acts on the fiscal side.

Accordingly, the repo rate continues to be at 8 per cent while the cash reserve ratio has also been retained at 4 per cent despite inflation based on the Wholesale Price Index coming down to a 5-year low of 1.77 per cent in October.

The low inflation is not because of structural changes in the domestic economy but due to fall in international prices of crude, which has declined to a historical low, said Shashwat Sharma, Partner -- Financial services, KPMG India.

"Therefore, we understand and appreciate the RBI's stance on no cut in interest rates and look forward to structural changes by the government in the domestic economy," he added.

However, RBI has clearly opened the window for rate cuts to begin in the next review in February 2015 or earlier, Kapoor said.

"I see space for monetary accommodation to the tune of close to 100 basis point cut over the course of next 12 months in 2015-16," he added.