Bankers want RBI to halt rate hike

**Mumbai:**Fearing a deterioration in assetquality and to fire up credit demand, top bankers today urgedthe Reserve Bank to pause on its interest rate hike cycle thathas already seen 12 hikes in the past 19 months.

“Bankers want a pause (to rate hikes). It goes withoutsaying… (and) for a longer period of time,” chief executiveof Indian Banks Association, the umbrella body of banks, KRamakrishnan told reporters here.

The Reserve Bank is scheduled to unveil the secondquarter monetary policy on 25 October.Bankers are concerned because there is no pick up incredit and the actual disbursements happening at present arethe proposals sanctioned earlier, he said after the customarybankers’ pre-policy meeting with the RBI Governor DuvvuriSubbarao and the deputy governors.

“Frankly speaking, credit growth is muted. The creditgrowth has not been to the expectations, capex (by companies)is virtually at a standstill, investment is not reallyhappening,” Ramakrishnan said.

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However, as of 9 September, non-food credit growth loggedin 20.1% or by Rs 31,490 crore, according to the RBIdata. But this was mostly due to the disbursals of outstandingcredit orders by the petroleum, coal and nuclear sectors.Bank of Baroda Chairman and Managing Director MD Mallya,

who also chairs the IBA, said demand for credit has been"muted" and is likely to stay so for “some more time.”

After loosening its key rates during the slowdown period,the RBI switched over to tightening in March 2010 and hasraised its key short-term rates a record 12 times since thento cool down the uncomfortably high inflation. At present the

repo rate, that is the short-term lending rate, stands at 8.25%.

Headline inflation - which stood at 9.78% inAugust - continues to remain high despite a good monsoon andfall in global commodity prices, while the repeated hikes haveended up putting a question mark on growth as investment isslowing down.The industry is demanding a pause and all eyes are set onwhat action the central bank takes on 25 October.

“There is a feeling that because of the pressurehappening in the credit portfolio there is a possibility thatnon-performing assets can go up,” Ramakrishnan said.

This will entail an increase in provisioning againstdoubtful assets which will eat into banks’ bottomlines overthe next quarter and also affect the net interest margins(NIMs), he said.Mallya also admitted there is a pressure on assetquality, especially from the steel and textile sectors, butrefrained from giving an estimate on the number.

Bankers who met the RBI top echelons also included StateBank Chairman Pratip Chaudhuri, ICICI Bank Managing Director and Chief Executive Chanda Kochhar, HDFC Bank ManagingDirector and Chief Executive Aditya Puri and Standard

Chartered’s Neeraj Swaroop, among others.

However, none of these bankers spoke to the waitingreporters.

PTI