India has reached closer to the peak of the interest rate cycle, and that the return of normalcy is in sight, said Sanjiv Chadha, MD and CEO, Bank of Baroda here Wednesday.
Chadha, who was on a visit to International Financial Services Centre (IFSC) at GIFT City to inaugurate an expanded IFSC Business Unit, said, “We are probably very near to the peak of the interest rate cycle. Both - the way inflation is heading and the fact that real rates are now positive. The rates that we see now, are not very different from what they were a year before covid. We are not seeing extraordinary rates as we see in western countries.”
Notably, the RBI’s Monetary Policy Committee has implemented a cumulative increase of 250 bps in repo rates since May last year amidst inflationary pressures. In its latest meeting held earlier this month, the MPC had kept the policy repo rates unchanged.
Chadha informed that the normal rates are good for the market because “they make sure that you have right incentive for investment and also in terms of the incentives for depositors, who again are getting positive returns.”
He further stated that the last year was a good period for the banking sector, while he suspects some moderation to take place after the post-covid bounce in demand, “But never-the-less, we should see a trajector,y which is much more elevated compared to last 3-4 years,” said Chadha adding that the banks can now eye for better asset creation cycle, as compared to last 5-7 years.
At the inauguration of the new and larger premises at Brigade International Financial Centre in GIFT IFSC, Gandhinagar, Chadha stated that the IBU of the bank has recorded a growth of 500 per cent since it started operations in 2020.
“When we started three years ago, the IBU unit had a business of some $700-800 million till March 31,2020. Over the past three years, we have been able to build this business to more than $5 billion. Comparable to our business from London unit. As a consequence, IBU at GIFT City has become the fourth largest unit for our international banking after New York, Dubai, and London,” said Chadha expressing confidence to make GIFT IBU the third largest surpassing London anytime soon.
”Today, we have a balance sheet of over $5.5 billion from GIFT IBU. We hope to grow this to double or triple in three-four years. Over the next 3-5 years, along with NYC, GIFT IBU will be the one of the two major wholesale business centres for us,” he said.