The chairman of the State Bank of India (SBI) Mr. P Bhatt has said that he expects the interest rates to remain stable in the next six months. CRR is currently at 5% and many expect it to go up
50 basis points due to inflationary pressures.

Reserve Bank of India (RBI) is due for its policy review on the end of the month and SBI expects no rise in the rates. CRR is the percent of deposits each bank has to park with RBI on a mandatory basis.

Bhatt said, “I do not see interest rates going up in the next 4-6 months. The industry still has a lot of liquidity and there are not many avenues to get returns.”

He also indicated that a slow recovery could be seen in loan offtake however the changes in provisioning rules could result in a rise of bad loan provisioning. Relating to the country’s largest bank he said that the gap of Rs 50,000 crore, or 8%, of total loan portfolio was registered between loan sanctions and disbursements. He also indicated that the bank is going to float a small size retail bond issue to test markets.

Citing substantial liquidity in the system even the Bank of Baroda chairman MD Mallya agreed to the view and expects stable interest rates for the next few months.

Bhatt expressed that a possible credit growth of 16% growth against RBI’s projection of 18% would be a fair rate for the economy. SBI saw credit growth of 13% between April and December
2009. He expects the loan disbursements to pick up and said the bank is not too worried about the defaults as retail loans constitute only 10% of SBI’s loan portfolio with an average loan size of Rs 15 lakh.