Million dollar question: Will interest rate come down?

NEW DELHI: The Reserve Bank and bankers today sang different tunes on the million dollar question of whether interest rates will come down or not.

While RBI Governor D Subbarao said cut in policy rates should reflect in lending rates, Indian Banks' Association (IBA) Chairman T S Narayanasami ruled out immediate cut in interest rates, saying bond yields are attractive for banks to park their money with G-Secs.

However, the country's second largest lender ICICI Bank's CEO and MD K V Kamath said the bank will take a call on cutting interest rates in a few weeks but high bond yields are coming in the way.

"We are talking to banks to understand what their perception is... Policy rates have to be transmitted to lending rates by banks. We are investigating about the transmission mechanism," Subbarao said at a CII annual conference here.

On the other hand, Narayanasami said banks cannot lower their lending rates under the current scenario.

"There is no more headroom for banks to cut their prime lending rates (PLR) and deposit rates in the near future," Narayanasami, who is also CMD of Bank of India, said, adding the apex bank has done enough easing and further steps by RBI would not help.