Interest rates are unlikely to see an upward pressure due to the budgetary measures,

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say bankers.

“Interest rates may not be impacted much since the government’s borrowing programme has been on expected lines. This will not have an adverse impact on bond rates,” chairman and managing director, Bank of Baroda, M D Mallya, told Financial Chronicle.

Mallya said that he said that interest rates would remain stable over the next two to three months. “In the next two to three months, I do not feel the interest rates will go up. We will have to see how the inflation shapes up during that time,” he said.

Albert Tauro, chairman and managing director, Vijaya Bank, agreed with Mallya. “Borrowing levels have not risen much. There is enough liquidity in the system. I don’t see interest rates going up in the next two to three months. We have to see what is there in the credit policy that comes up in the next few months,” Tauro said.

Rana Kapoor of Yes Bank agreed. “The government borrowings are flattish relative to last year, which means in a growing economy there is abundance of liquidity. Therefore, it is unlikely to have a severe impact on bond yields and subsequently on interest rates,” said Rana Kapoor, managing director and chief executive officer, Yes Bank.

An ICICI Bank official said that the government’s borrowing programme would have a marginal impact but other factors would determine interest rates. “Government borrowing might not have impact on interest rates since it is on expected lines. However, there are other factors. For example, we have recently increased deposit rates and that could have an upward impact on interest rates,” a senior official of ICICI Bank told FC on the condition of anonymity.

K V S Manian of Kotak Mahindra Bank, however, has a different take. “The announcement on government borrowings is line with market expectations. This will put pressure on yields on government securities and subsequently, interest rates are going to go up,” said KVS Manian, group head of retail liabilities and branch banking, Kotak Mahindra Bank.

Interest rates will continue to remain under pressure, particularly as inflation continues to remain a concern, said Jitendra Jain, chief financial officer at GMR. The general expectation was that lending rates would not start moving up until June 2010. State Bank of India chairman OP Bhatt too had said interest rates would not rise before June 2010.