India banks ask interest rates to be stabilised

Bankers said the fall in loan growth below 10 percent may be aggravated once RBI increases rates.

The heads of State Bank of India, ICICI Bank, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India and HDFC Bank urged the Reserve Bank of India (RBI) to keep interest rates stable at its policy review later this month, saying any increase could further dent sluggish demand for loans.

The chairman of a state-run bank, after a meeting with central bank officials ahead of the policy review, said the bankers told the RBI that "this is not the right time to hike rates and indicate increase in lending rates."

Recent strong data has raised expectations that policy rates might also be raised, with December inflation at a one-year high of 7.31 percent, as stated in a report in Reuters.

Loan growth in India fell below 10 percent in November despite a reduction of 300-350 basis points in lending rates since the start of 2009. Companies have been raising funds at cheaper rates from overseas.

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