Interest rates can only go up, say bankers

Interest rates in India have reached their bottom and will rise in coming months as lending grows faster, top bankers said at a conference in Mumbai on Tuesday. 

"Rates will remain flat for now but can go up by the end of the year. We will have to see how credit offtake shapes up," HSBC India Chairman Naina Lal Kidwai said at the bankers' summit organised by the Indian Banks Association and FICCI.

Chanda Kochhar, chief executive and managing director of ICICI Bank, expressed similar views, saying the deposit and lending rates have probably bottomed out. "From hereon, we will gradually see a credit pick up taking place and then the rates would harden," she said. 

The comments come a day after K C Chakrabarty, deputy governor at the Reserve Bank of India, said Indian banks still have scope to reduce their deposit and lending rates. 

State-run banks have cut lending rates by 125-275 basis points since October 2008 while rates on up to one-year deposits have come down by 175-325 basis points, as per RBI data. During the same period, the central bank has cut its key lending rate by a hefty 425 basis points. 

ICICI Bank's Kochhar also said that rising bond yields will impact treasury profits of domestic banks this quarter. "Some of the quarters in the last year have yielded a lot of profits for banks on the treasury side. That may not be true this quarter. There is no other impact," she said.