Senior officials of SBI, ICICI Bank, PNB, Bank of Baroda, HDFC Bank and OBC expect stable interest rate in short to medium term, as it would help the economy to sustain a higher growth.
Despite an impressive 8.1 per cent GDP growth rate in the first quarter, economists expect the annual growth to be at 7 per cent for 2005-06, as predicted by RBI and finance ministry earlier.
Though a survey by an industry chamber shows interest rates may rise by 1 per cent, bankers say tinkering with the rates is unwarranted at this juncture.
Citing the recent auction of government papers, a bond dealer said, "RBI rejected all the bids as the yields were too high. RBI may not like to spoil the market trend of stable rates. This can be an indication that RBI may not raise Bank Rate or Repo Rate."
According to RBI data, bids were invited for 9-year government securities worth Rs 6,000 crore (Rs 60 billion) and 30-year papers worth Rs 3,000 crore (Rs 30 billion) on October 6.
Though the central bank received bids worth Rs 7,596 crore (Rs 75.96 billion) for the 9-year paper and Rs 4,606 crore (Rs 46.06 billion) for the other security, a bond dealer said all the bids for the 9-year paper were rejected while accepting the bids of 30-year paper.
A banker said if the bids were accepted, it might have pushed up the yields on government securities and put an upward pressure on interest rates of commercial banks.
"RBI is probably looking at the moderate inflation and excess liquidity," a bond dealer said referring to less than 4 per cent inflation till September 24.
Inflation may not cross 5 per cent this year, the dealer said pointing to moderate impact of domestic fuel price hike on the overall price level.
Another bond dealer said any hike in interest rate will affect the financial position of the government, which has to raise at least Rs 58,000 crore (Rs 580 billion) from market in next six months.
RBI's benchmark Bank Rate has been kept unchanged at 6 per cent for over two years. The Repo Rate is now at 6 per cent while Reverse Repo Rate is at 5 per cent.
RBI had raised the reverse Repo Rate in April policy to suck off excess liquidity and rein in inflation.
More from rediff