Claiming that interest rate would remain stable in the short term, State Bank of India chairman O P Bhatt on Tuesday said that interest rate cycle has more or less peaked.
"The interest rates have more or less peaked," he told reporters on the sidelines of Pravasi Bharatiya Divas in New Delhi.
When asked about the liquidity position, the SBI chairman said there is slight pressure on liquidity, but there was no shortage of credit for the 'productive sector.'
There are various instruments at bank's disposal to improve liquidity crunch, he said.
The country's largest commercial bank had last month hiked its benchmark prime lending rate (PLR) by half a per cent to 11.5 per cent following the RBI's move to increase Cash Reserve Ratio (CRR).
Referring to Finance Minister P Chidambaram's proposal to utilise part of foreign exchange reserves for infrastructure, he said, it was a good idea, but banks would have to wait for the fine print of the government's policy in this regard.
The ministry of finance has set up an expert committee headed by finance secretary Ashok Jha to work out a road-map for the utilisation of forex reserves for the infrastructure sector.
The government has been maintaining that the country's infrastructure sector requires over $320 billion investment over a period of five years.
Bhatt also said the government could utilise the funds blocked in gold stocks. "At present, out of 800-900 tonne annual gold imports, about 500 tonnes of gold is imported through banking channels," he said, adding these funds could be freed for infrastructure investment as well.
In line with two per cent interest subsidy to the banks on farm credit, Bhatt said the government should consider giving subsidy to infrastructure financing as well.
© 2024 Rediff.com -