Thursday, October 6 2005 19:41 Hrs (IST) - World Time -

New Delhi: Bankers expect interest rates to remain stable in the short to medium term as there is enough liquidity in the market.

Interest rates will remain range-bound, but their exact movement will depend on inflation and oil prices, ICICI Bank Executive Director Chanda Kochhar told media persons in New Delhi.

There is no reason for interest rates climbing up, she said.

Skirting off questions on the proposed credit policy, Kochhar said there was enough liquidity in the market to take care of rise in credit off-take.

Even if any movement happens in the interest rates, it would be range-bound, she said.

Bank of Baroda Chairman A K Khandelwal said in Mumbai, "Inspite of the global crude oil price hike, there is no pressure on the interest rates as liquidity in the system is good enough."

He, however, added that interest rates in the short term at best can go up by 25-50 basis points.

Oriental Bank of Commerce Chairman K N Prithviraj said interest rates would remain stable because of sufficient liquidity in the market.

The Reserve Bank of India is slated to announce busy season credit policy later this month.

Global consultancy firm Mckinsey said in its quarterly journal that RBI must keep interest rates reasonably competitive to sustain a buoyant economy.

Since 2002, the bank has reduced the rates to current 6-8 per cent from 14-18 per cent, Mckinsey said.

Spurred by this decline, consumer lending has increased by more than 30 per cent a year and residential construction and consumer durables have also seen healthy growth, the global consultant said.

The journal, however, warned that high deficits of states was not only putting pressure on interest rates but also lead to massive market borrowings, which siphons off funds that will otherwise be available for capital investment.

When asked whether ICICI has any plans to offer concessional rates of interest during the festival season, Kochhar said interest rates are just one of many factors to facilitate consumer buying.

Moreover, any offer may not include every product category, she said, but refused to divulge further on the pretext that there was still time for the festival season.

On the recent decision of National Housing Bank to raise risk weight age requirement of housing finance companies to 75 per cent from 50 per cent, Kochhar said ICICI Bank would not be impacted from it, since ICICI Home Finance contributes a small fraction of total housing loans given by the bank.