Indian interest rates are looking comparatively stable but liquidity pressures are seen continuing as credit off-take rises in a growing economy, a top bank said on Sunday. Asia's third largest economy is expected to grow 8.1 percent in the year to March, 2006. Booming growth has led to rising lending by banks.
That has also led to a cash squeeze in the system, but the government has asked the central bank to ensure ample supply to maintain GDP's upward trajectory.
"Interest rates are now looking comparatively stable," A.K. Purwar, chairman of top commercial bank State Bank of India, said.
Last month, the government's annual economic survey said a slowdown in foreign exchange inflows from previous years and increased credit offtake could exert upward pressure on rates.
Cash supplies have also dwindled in the past two months due to a $7.3 billion redemption of an expatriate deposit scheme. "Going ahead, liquidity pressures will continue," Purwar told reporters.
Mumbai-based SBI has already raised home loan rates 25-75 basis points, joining other financiers as cost of funds rise in the fast growing economy. State-run SBI, India's largest lender, said earlier in February it would stop offering fixed-rate home loans for above 10 years because of uncertainties about interest rates over the longer term.