Expert Answers: Post-March, interest rates will ease

BUDGET TALK: K V S Manian, Head, Retail Liabilities and Branch Banking, Kotak Mahindra Bank.

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Keywords: Sector, Banking

K V S Manian: I don’t think the budget will have anything specific which will adversely affect Interest Rates. CRR is usually a matter of Monetary policy of RBI and not of the budget, though RBI has in the past synchronised its announcements just after the budget. I do not expect a CRR change just now. Depending on the contents of the budget if market perceives them to be positive , FIIs will behave like any other investor would. I dont see lot of mergers and aquisitions taking place. Banking sector is a surrogate for general economic growth and should generally speaking do well if the economy continues to grow at 8-9 %.

Desraj: Hello sir, I want to know that what will be the impact on the lending rate of the bank

K V S Manian: Already you are seeing declining lending rates from some of the banks , I think you will see more of this Post March.

Pooja Patel: There’s a common turf between growth and inflation while considering formation of any economic policy especially to a developing nation like ours, where emotions are hit widely. Considering this fact and the mere inactiveness of the latest monetary policy where the interest rates with key rates remained unchanged; banks are in a lull. With more so herculene act of HDFC cutting its interest rates other private banks have been left with little space of choice o survive this competitive market.

SBI too following HDFC's rate cut, cut its interest rate by 25 bps. Other PSU also need to buck up in this regards. With such a heated environment if the Union budget rides the horses for no actions but combating inflation it would be like sheding the load on the alreaded loaded balance with growth needs poorling hanging in ambiguity. Some of the expections spelled out eye folded by the banking sector could be as follows: 1. HIking the FII/FDI limit for PSU banks from 20% to 26% 2. Sops to boost Infratructure finance companies to raise fnance at cheaper rates (Tax exempt funds) 3. Subventio to banks for lending to agriculture 4. Interest Subsidy on Farm loans And so on. Well if not all atleast some matters mentione above considered by the PM would atleast cushion the way out for banks from the steam till the next and most awaited monetary policy review happens.

K V S Manian: Let us wait and see, some of the measures suggested by you are good and should be looked in to by FM.

V A Varghese: Hi Manian, Do you expect the interest rates on Term Deposits to drop after the Budget, which will enable Banks to lend aggressively Regards Varghese.

K V S Manian: I expect march to remain tight , and rates will probably remain there or inch up , but post March I see interest rates easing

Varada Anand: Good Afternoon Sir!, As an ex-kotak employee i always admire and relish opinions of the organization’s big minds, in that context i would like to hear from you on the MoF's thrust in agriculture and rural financing sector commitments for private sector banks, i find more and more the pvt sector banks not showing any great commitment on this sector, i feel its not only a social responsibility but also a huge opportunity in these markets. This would form the platform for a much more comfortable and enviable CASA portfolio and access to low-cost funds.