Bankers were of the opinion that though currently, there is liquidity overhang in the system, it would be all sucked out once government borrowing programme — which is quite large during the year — begins and possibly strain the system. Bankers are in favour of consensus on the time and overall management of borrowing programme.

However, they urged the RBI to manage government borrowing in a phased manner so that there is no pressure on interest rates. By and large, it should be possible to manage it in a manner that it will not pose any huge stress on the system. Leading bankers who met the RBI officials included SBI chairman OP Bhatt, ICICI Bank MD Chanda Kochhar, Canara Bank CMD AC Mahajan, Neeraj Swaroop and IDBI Bank CMD Yogesh Aggarwal.

INTEREST RATES MAY HARDEN

MUMBAI: State Bank of India chairman OP Bhatt said interest rates could rise when credit growth picks up in the system. At the moment, the interest rate scenario is very soft. "For some industries and some players, it could see further softening, which could take place. But down the line, when credit growth picks up and when all the borrowings take place, either it would stabilize there or it may even harden a little bit,'' he said. Yogesh Aggarwal, CMD, IDBI Bank said that there are two kinds of interest rates. "While 10-year G-Sec yield will go up with market borrowings, interest rates on credit growth is essentially a function of demand and supply. So much of liquidity is there in the market right now and no much credit offtake was happening. So, I don’t see interest rates rising further on the credit side,'' he said.

... contd.