With inflation down to single-digit levels once again and industry sentiments at an all-time low, K V Kamath, managing director and CEO of ICICI Bank, today said that lending rates will need to come down by at least another 200-300 basis points to be able to ease pressures on the industrial sectors and units that have been affected by the ongoing global economic downturn.Speaking at the World Economic Forum’s India Economic Summit being held here from November 16 to 18, Kamath emphasised the need for ensuring that domestic demand remains unhurt as India’s exports comprise only about 15 per cent of the total GDP and it is still largely domestic demand that is driving the Indian economy. “This (decline in inflation) will bring the rates down and we will see credit going into all sectors, whether it is building new capacity or the consumer side of it,” said Kamath. As for when banks would start cutting their rates, Kamath said, it would take at least 3-6 months for interest rates to fall by about 200 basis points. “Interest rates don’t change overnight. The government and policy makers have taken the right step and we will see the impact very soon, but it will depend only on what the market is signalling,” he added.Inflation saw its biggest-ever week-on-week fall of 1.74 per cent this week when it came down to 8.98 per cent from the previous week’s level of 10.72 per cent. This was the first time in almost than five months that inflation fell to a single-digit level.Speaking at the same event earlier, Rahul Bajaj, chairman and managing director of Bajaj Auto, had pointed out that it is largely the consumers who are facing problems getting credit to meet their demands and that the benefits of the liquidity infusion done by way of cutting key policy rates have not entirely percolated down to them.The Reserve Bank of India (RBI) had cut the repo rate (the key short-term lending rate) by 150 basis points to 7.5 per cent recently to ease the domestic liquidity crunch. Since then, most state-run banks, including State Bank of India, have cut lending rates by as much as 75 basis points.
