The largest lender of the country, State Bank of India has indicated that it might not increase interest rates in the short term. The bank estimates sufficient liquidity to lie with it despite the outflow of cash that is expected on advance tax payments and 3G auction.
"I think there is enough liquidity in the system...on an average, there is still a fair amount of liquidity in the system," State Bank of India Chairman, O P Bhatt said.
It is expected that around Rs. 70,000 crore cash outflow is going to take place next week on account of payments to be made to telecom companies. This and advance tax payments together would amount to approximately Rs. 1,00,000 crore of cash outflow by June mid.
Bhatt said that it is too early to say now as to the effect of cash outflow on account of 3G payments would be on a temporary or permanent basis.
"We have requests (from telecom companies) for that kind of money (nearly Rs 18,000-crore)...that is at the upper end. We may provide roughly half of that," Bhatt said.
However, liquidity is crunching gradually from the system and the bank has repriced some categories of loans. It has raised short term corporate loans by 25-50 basis points, he said.
The bank has reported a decline in its net profits in the fourth quarter of the fiscal last ended.