SBI chief says interest rates may go up if RBI tightens policy

MUMBAI: State Bank of India's Chairman OP Bhatt on Monday said that interest rates are likely to go up in the coming months if the Reserve Bank of India (RBI) tightens its monetary stance.

He has also warned that loan defaults, particularly from the SME segment, may rise over the next two quarters.

"Inflation is rising and there are fears that regulatory action may lead to hardening of interest rates," SBI's Chairman said at the Bancon conference here.

Reserve Bank is scheduled to review its annual monetary policy later this month, when it is expected to hike Cash Reserve Ratio, the percentage of amount banks have to park with it,to suck out the excess liquidity from the system.

Referring to possible rise in defaults, he said "NPAs are rising, specially in the SME sector and given the lag effect, my sense is that it will continue to rise over at least next two quarters.