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ICICI Bank to cut rates soon: Kamath

K. V. Kamath

HYDERABAD: K. V. Kamath, Managing Director and Chief Executive Officer of ICICI Bank, has indicated cut in interest rates in a few weeks.

Talking to presspersons on the sidelines of Strategic Management Society’s special conference at the Indian School of Business here on Saturday, Mr. Kamath said that the rate cut this time would be steeper as he foresaw inflation expectation rate to be below five per cent.

“We clearly see what the market is signalling on the rate cuts,” he said. The yield on 10-year Government bonds moved down by 150 basis points in the last two weeks. “We need to keep that in view, as that would set in motion the deposit and lending rates.” The rates on one-year term deposits had dropped by 150-200 basis points in the last one week. The drop in bulk lending rates would further accelerate, thus signalling correction. Lending and borrowing rates wouldn’t change so quickly. The banks were re-pricing their books, as they understood that the rates were moving down. “I can clearly see the re-pricing starting now. We will have to give it some time.”

When interest rates dropped in the books, which could be seen happening, the rate cut would have to be extended to all loans, including those with retrospective effect, he said replying to a query. The magnitude of the drop in the rate on Government bonds was a good indicator, for it provided the trend (on how much could be the rate cut). To a specific query on whether ICICI Bank would bring down the rates, he said: “Any bank which doesn’t lower rates is not competitive. And, I am part of the system. Every one in the system will have to play the ball.”

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