The Hindu Business Line : Interest rates likely to remain stable for now, says Kamath

New Delhi, May 8 Interest rates are likely to remain stable in the near term and liquidity in the system is quite good, according to Mr K.V. Kamath, President, Confederation of Indian Industry (CII).

Mr Kamath, who is also CEO of the country’s largest private lender ICICI Bank, said on Thursday that the market was yet to judge which way interest rates will move. In the second fortnight of April 2008, the Reserve Bank of India had announced cash reserve ratio hike of 75 basis points to mop up Rs 27,000 crore from the system.

“Liquidity is good in the system. As long as liquidity is good, market will determine what the rate is. At this point of time, I do not think the market has judged which way interest is going to go. Bankers and market players still need signals as to where the true level is. At this point of time, I see no change (interest rates)”, he told reporters on the sidelines of a CII event here on Thursday.

Rupee track

On the recent weakening of the rupee against the dollar and whether he expects the rupee to continue to depreciate against the dollar, Mr Kamath said that he cannot forecast where the rupee will be going. “All that I can say is the economy is strong. The recent weakening of rupee should be looked at from the point of strengthening of the US dollar by 5-7 per cent against major currencies in the last few days. The US market is also taking a view that there will be no further interest rate cuts there,” he said.

The CII President said that capital flows into India are not that strong now and this may have also led to weakening of the rupee against the dollar in recent days.

On the rising global crude oil prices, which has crossed $122.31 per barrel, Mr Kamath said that the recent 5-10 per cent increase in prices is not going to dramatically change the situation. “As prices went up from $35 to $120, we need to see how much we have suffered. There is a need to see what the extent of that suffering is. Given the drivers of growth, impact of oil in day-to-day life is getting less,” he said.

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