Mr. O.P Bhatt, Chairman and Managing Director of the State bank of India ruled out any increase in interest rates in the second half of the current fiscal. He also said that the high liquidity would not lead to any further cuts in interest rates since the banks had already priced their products lower.
Mr Bhatt took charge as the Managing Director, in-charge of national banking at SBI in April 2006. Before this he was the MD, State Bank of Travancore. He started his career as a probationary officer in SBI in 1972. During the course of time, he held several key assignments in the bank. He served as Managing Director of State Bank of Travancore from January 2005 to April 2006. His term will expire in March 2011.
On the sidelines of a conference on Corporate Governance organised by Indian School of business, he said "A significant portion of the liquidity is through deposits that carry a fixed rate for a period of time."
Responding to a question he said that he did not feel that excessive liquidity would push inflation. Instead, rising commodity prices could be a concern, he added.
He said that credit demand was likely to go up in the second half of the current financial year to 6.75 percent as against the initial expectations of 6.5 percent. He pointed out that though the retail credit was strong, it could be better.
When asked about his opinion on RBI's proposal to replace the Benchmark Prime lending rate (BPLR) with a base rate, he said that it would bring more transparency in the system. As per the proposal the benchmark rates would get automatically revised with the reduction in cost of funds.