Banks are unlikely to increase lending rates in the near future despite recent liquidity tightening measures announced by the Reserve Bank of India to contain rupee fall, as demand for loans has remained weak.

As liquidity tightening measures were likely to be temporary, any change in lending rates would depend on the length of these measures, according to bankers.

“Loan demand is too weak. That is why there may not be enough demand. We are waiting because these steps are supposed to be temporary. So, unless they (the RBI) linger on for very long, none of the banks is increasing its loan pricing,” Chairman and Managing Director of State Bank of India, Pratip Chaudhuri, told reporters at the customary post-policy conference here.

When asked how long could banks hold on to the current lending rates, Mr. Chaudhuri said that 2-3 weeks would be the normal waiting period for SBI after which it would take a call.

Some of the bankers also said that changes in lending rates would depend on the impact of liquidity tightening measures on cost of funds for banks.

“Ultimately, you have to look at the impact on total cost of funds of the bank…So, I guess we will have to look for the market dynamics on this, and see how rates come off. As of now, immediately, we don’t feel the need to raise rates but we will have to watch on what happens over the next 6-8 weeks to take a call,” Managing Director and Chief Executive Officer of Axis Bank, Shikha Sharma said.

Meanwhile, given the liquidity tightening measures, the bankers also requested for some relaxation in the provisioning norms in this tough environment. PNB Chairman and Managing Director K. R. Kamath, who is also the chairman of the Indian Banks’ Association, said bankers requested the regulator to relax provisioning norms on restructured standard assets, which was increasing by 75 basis points every year for the banks.

Banks have also requested for increasing the HTM (held-to-maturity) percentage in the overall SLR (statutory liquidity ratio) portfolio to 25 per cent from the present 23 per cent given the tight liquidity condition, he said.

Bankers also sought switching of AFS (available-for-sale) category bonds under the SLR to the HTM category, which is not allowed at present.

Later, replying to questions on the bankers’ demand, Governor D. Subbarao said he would look into the requests but would not agree to all of them.

“Deputy Governor Anand Sinha will look into the demands over the next month to form a view on this matter,” Dr. Subbarao said.

On the bankers’ demand for some relaxation in the new CRR mandate, RBI Deputy Governor K. C. Chakrabarty said banks should learn to do their cash management business better and that if a particular client was not meeting the obligations on time, the bank should make the client pay for it instead asking the central bank for some relaxation in reporting.

“We gave you 15 days CRR reporting time in the past due to non-computerisation of branches. But today, with all the branches on the core banking system, where is the question of more reporting time,” Dr. Chakrabarty asked.