Interest rates will fall within 3 months: ICICI Bank chief

New Delhi: Everyone is waiting for the tide of interest rates to reverse.

And with the economy growing at great pace and inflation well under control, it's only a matter of time before Indian economy enters a low interest rate cycle again.

And ICICI Bank CEO and Managing Director KV Kamath says it's coming earlier than one can actually anticipate. Interest rates — both lending and deposit — may fall within the next three months as banks are witnessing a slowdown in credit demand in certain sectors, Kamath said on Tuesday.

"The interest rates have peaked and might probably come down," Kamath, who heads the country's top private lender, told journalists on the sidelines of a CII press conference in Chennai.

Earlier this month, HDFC Chairman Deepak Parekh too had said that interest rates in the economy had peaked. "Credit growth has slowed down. The lay consumers are under pressure. There is a slowdown in demand in certain sector. Deposit mobilisation is strong. Liquidity is strong," Kamath said, warning that the India growth story could be derailed if the interest rates rose further or remained at the same level.

"Call rates are at 0.1 per cent, inflation is well under control, and the first challenge is to bring down borrowing rates. We have to wait for the signal from the RBI and in another three months, we might see the cycle turn," he says.

Kamath's remarks come ahead of the July 31 quarterly review of monetary policy by the Reserve Bank, which is widely expected to leave key lending and borrowing rates untouched given the fact that inflation is within the annual target of five per cent.

Inflation for the week ended June 30 stood at 4.27 per cent. RBI Governor YV Reddy, in his address to the Central Bank of Russian Federation in Moscow earlier this month, had expressed satisfaction with the credit contraction in the real estate sector, noting that the sector has started showing some signs of deceleration in the recent period after three years of over 30 per cent growth in credit disbursal.

(With PTI inputs)