RBI's liquidity move boosts rate cut expectations

The Reserve Bank of India's steps to address liquidity conditions support the expectation of a rate cut and decreasing deposit rates, said K SATYANARAYANA RAJU, managing director and chief executive officer, Canara Bank, in a telephonic interview with Abhijit Lele. Edited excerpts:

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What are the implications of the RBI's move on the system and your bank?

The deposit rates may come down slowly. They are injecting 60,000 crore in three tranches. We expect that some softness may happen. But, if it happens before March or not, again, is a question. The reason is most of the banks may focus on top line growth. If they (banks) go for it, then they will engage in competitive pricing. So, the interest war, whether it will end before March 31 or not, is something we have to wait and see.

Given the RBI's steps to address liquidity issues, are you expecting the rate cut in the upcoming policy review?

Naturally, because last quarter itself they (RBI) mentioned a neutral policy stance. And yesterday's guidance to the market is also supporting our expectations. But, ultimately we have to wait and see.