RBI action could harden interest rates: SBI

OP BhattChairman of the country's largest bank, OP Bhatt said that the interest rates are likely to rise as the Reserve Bank of India moves to tighten its monetary policy.

SBI chief also hinted that loan defaults mainly from the SME segment may rise in the coming quarters.

He said, "Inflation is rising and there are fears that regulatory action may lead to hardening of interest rates," in a conference organised by Indian Banks' Association and SBI. The summit recognized the fact that 650,000 villages in India are yet to be provided with the banking facilities.

Bhatt suggested the outsourcing model for reaching the rural areas. Stressing the point that banks need to improve their risk management mechanisms, he added that the demand from large firms are to be given due attention and the world class companies should be provided with services that match their standards.

Cash Reserve Ratio is expected to rise as RBI is to hold its annual policy review later this month. The ratio is the proportion of amount all banks has to park with the RBI on a mandatory basis. He also expects a rise in non-performing assets in the next two quarters.