Repricing of credit only when there is enough liquidity: Kamath.
New Delhi: If the decline in inflation continues, it will bring in stability and lend confidence to the banking system to reduce lending rates, the Managing Director, ICICI Bank and President Confederation of Indian Industry (CII), Mr K.V. Kamath, said on Tuesday.
“If inflation is truly beaten, banks’ confidence will go up. Banks are shying away from lending to unsecured borrowers, and are instead holding cash with themselves. Banks are conservative and they are waiting for the right signal. Once that clarity comes, there will be an equilibrium position,” Mr Kamath said at a press conference at the India Economic Summit.
The ICICI Bank Managing Director said that he expects the Reserve Bank of India to take more monetary measures to ease the liquidity situation. Asked whether private sector banks would also look at cutting the lending rate, Mr Kamath said that private sector banks would like to see enough liquidity before re-pricing credit. “It will take some time - not months but a few weeks or a few days” he said.
Agreeing with what the Finance Minister, Mr P. Chidambaram had said earlier in the day, Mr Kamath said that customers are trying to figure out when prices are going to settle. “Demand will come back to 80-85 per cent of the previous levels once price discovery happens,” he said.
Mr Kamath said despite the global slowdown, India was better off than many others around the globe. ``We are in a much better position than those elsewhere. This is something that we need to articulate to the countrymen. A growth rate of 7 per cent when the rest of the world is almost in recession is not so bad,” Mr Kamath said.
The CII President said that if one were to look at investments in the pipeline, the country was not doing too badly. ``If you look at investments in the pipeline at this point of time, as of two weeks back, no business had said that any of their investment is being pulled off. I think we are pretty well taken care of till 2009-2010. If no one invests going forward from today, then what happens in 2011 is up for question,” Mr Kamath added.
