‘Mobilisation of deposits has to pick up’

MANGALORE, MAY 3:  

Chairman and Managing Director of Corporation Bank Ajai Kumar said it is too early to comment on lending rate cut.

He told Business Line that a call on reduction in base rate may be taken over a period of time, and would depend on how the deposit rates move.

“In the present scenario, where deposit mobilisation is still not picking up, it would be too early to comment on lending rate cut,” he said.

He said that the reduction in repo rate by 25 basis points indicates RBI’s signal for promoting growth in an otherwise inflationary scenario, leaving little space for further rate cuts.

Managing Director of Karnataka Bank P. Jayarama Bhat said the RBI’s statement that the scope for further monetary actions is limited in the present macro-economic conditions may put pressure on the interest rates on short term.

The growth rate projection at 5.7 per cent seems to be very realistic under the present conditions. Demand is expected to pick up towards the second half of this financial year with positive actions expected on the fiscal side too, Bhat said.

The reduction in the consumption may reduce the current account deficit from the present high levels.

Bhat said that the 25-basis-point cut in repo rate by RBI was in response to the Government’s commitment to rein in fiscal deficit and to the slight improvement in the macro-economic conditions.

Shyam Srinivasan, MD and CEO, Federal Bank, said the RBI has begun the new financial year on a hopeful note with a 25 bps repo rate cut.

“I am of the view that monetary policy action, by itself, cannot revive growth. There’s a lot that needs to be done for easing supply bottlenecks, and stepping up public investment, alongside continuing commitment to fiscal consolidation,” he said.

http://www.thehindubusinessline.com/industry-and-economy/banking/mobilisation-of-deposits-has-to-pick-up/article4680937.ece