Presidents of major banks met the RBI governor on Monday before the announcement of central bank monetary policy July 26. With inflation, as shown by the index of wholesale prices remained stubbornly above the level of 9% to 9.44% in June, up slightly from 9.06% in May-RBI is expected to continue tightening money . Most economists have predicted that within a major global crash RBI is expected to raise rates by 25 basis points. The central bank aims to reduce the prices of interest rates increasing and reducing demand. High interest rates also increase supply by making it expensive for operators to keep their stock and forced them to drive sales.

The bankers have a contrarian view on interest rates policy. Speaking to news persons after the meeting,

Bank of Baroda chief MD Mallya, who is also president of the Association of Indian banks, said that there was a

RBI if a pause in monetary tightening.

"The proposed funding for new projects has not come, and some slowdown in lending for infrastructure projects, such as energy and roads. Telecom has also slowed down," said Mallya. He said it also improved the growth of deposits. Banks are also a lawsuit against the immediate release of savings, he said.

Shikha Sharma, MD and CEO, Axis Bank, said: "There are signs of a slowdown in demand in the credit growth. However, although the new proposals do not come in there is sufficient demand from existing projects to maintain disbursements are the coming months. "

Bankers said the rate increases as the industry is operating near full capacity would discourage new investment.

The bankers say they expect some moderation in credit growth still go ahead. In addition, most lenders have raised rates in July in a delayed reaction to the central bank mid-term policy. Banks increased their lending rates include SBI, Axis Bank, ICICI Bank and HDFC Bank.

The data released by RBI last weekend showed that lending has slowed, while deposits grew faster than before. But despite the slower growth of bank credit continues from year to year increase in loans to stay ahead of the RBI targets for the year. Since July 1, 2011, plus outstanding on the books of banks, 19.9% ​​over 12 months to RS 40.86 lakh crore while deposits in the same period rose 18.4% to RS 54.88 lakh crore.

Increased rates could reduce demand, especially in the consumer side. At the same time, the deposit rate and the uncertainty of market values ​​of two digits, there has been a renewed interest in fixed deposit. The largest lender, State Bank of India also announced it would end penalties for early withdrawal of time deposits. While these measures will make it more attractive FD, increasing the pressure on bank margins.
Source: [TOI]