'Rates to remain elevated for loans, bulk deposits'

With the quest for resources becoming intense, Bank of India is stepping up efforts to raise low-cost deposits through branch networks in semi-urban and rural areas. With the rising cost of funds, loan rates for highly rated companies will need a relook to protect margins, RAJNEESH KARNATAK, managing director and chief executive, tells Abhijit Lele in Mumbai. Edited excerpts:

The Reserve Bank of India (RBI) has kept the policy rate and the stance unchanged. What is the signal to the market? How are the rates likely to move in the balance part of the year?

The pause was expected. The anticipation was that if any change happened, it would be in the third quarter. The signal to banks is that interest rates will remain elevated while giving credit and raising deposits, especially bulk deposits. Also, in the case of corporate credit, especially to AAA borrowers, lenders will have to take a fresh look at pricing. Even though risk weightings are 20 per cent for highly rated borrowers, the cost of deposits is rising and margins are getting impacted.