Bankers see downtrend in interest rates

The Reserve Bank of India (RBI) may opt to reduce cash reserve ratio (CRR) in the monetary policy review on January 24 rather than cut interest rates,Housing Development Finance Corp (HDFC) CEO Keki Mistry said while addressing an event arranged by Wharton University of Pennsylvania titled ‘India Economic Forum’ here.

The RBI has raised interest rates 13 times since March,2010,by 375 basis points in its bid to control inflation which has been above 9 per cent for a year. A rapid slowdown in food inflation in December has raised hopes of a reversal of the monetary tightening cycle.

Mistry,however,said that rising interest rates had minimal impact on the real estate market. “There is minimal impact of rising rates on real estate market,which is limited to metros. In tier-II and other cities,the impact has been minimal,” he said. Referring to outlook for the industry,Mistry said the current year would be better for the industry as interest rate environment is likely to be benign.

Referring to other reasons behind a possible high growth in 2012,Kochhar said strong rural consumption trend along with high growth in SME would drive domestic economy.

However,she said that euro zone problems would be critical in determining the growth of the domestic economy.

“India can grow at a rate of over 7 per cent and the global economic situation isn’t as bad as it appears to be,” chairman of ICICI Bank and Infosys,KV Kamath,said.

He said that Asian economies look fine at this point of time and the US economy can grow at a rate of 3-4 per cent this quarter. Kamath said it would take another 4-6 months for markets to stabilise depending upon the government’s policy action and reforms measures.

“There are many positives for the domestic economy in 2012. However,appropriate policy actions and removal of bottlenecks in infrastructure are the prerequisite for attaining higher growth rate going ahead,” chief executive officer of Deutsche Bank,Gunit Chadha said.