Consumer Loans might not get further cheaper
By Vaibhav Aggarwal
Jul 30, 2009
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Bankers feel that there is limited scope for further reduction in the lending rates in the near, based on the RBI review of monetary policy for the first quarter of the fiscal.

Further, it is reasoned that the benefits of lower interest rates have been passed to borrowers.

M D Mallya, Chief Managing Director, Bank of Baroda, confirmed that rates would remain the same.

It is expected as economy recovery picks put during the second half of fiscal, the rates might harden - "As the credit growth picks up, there may be some pressure on rates,'' said O P Bhatt, Chairman, SBI.

The Reserve Bank of India has kept the interest rates unchanged, expecting economic recovery in near future.

Explaining the Duvvuri Subbarao, Governor, RBI, said, "By October, most of the high cost deposits would mature, which would enable banks to lower deposit rates. As the cost of funds will go down, banks will be able to reduce lending rates."

He further stated that if inflation rises, it would force the regulator to tighten its monetary policy by October and the bank will not be able to cut lending rates any further.

The central bank also fears that the high base effect in the Wholesale Price Index coupled with accelerated credit take off in the second half of 2009-10, will cause the interest rates to head northwards.

However, rates on consumer loans including personal loans are likely to remain steady.


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