MUMBAI: State Bank of India expects interest rates to rise by 50 basis points in Dec, with chairman C S Setty saying higher rates could affect discretionary consumption credit demand but were unlikely to significantly dent overall credit growth given a 7.1% growth forecast for the economy.“Interest rates will influence the composition and quantum of credit demand, not immediately,” Setty said at the Business Standard BFSI Summit. “We need to distinguish between weakening of demand and moderation of credit growth. We are coming from a phase of robust growth in credit. While discretionary consumption demand could be affected, I do not think credit for productive activities will be impacted,” he said.Setty said he did not expect system-wide concerns over credit quality, although individual borrowers could face stress from higher interest rates.On deposits, Setty said household savings were undergoing a structural shift, with households increasingly practising asset allocation, even if they were not fully conscious of it. “There is only so much that rates can propel you in deposit mobilisation. What matters is service quality,” he said, adding that the ease of moving funds from savings accounts to term deposits had improved significantly.“The liquidity RBI has been providing and the FCNR flows will ensure that there is no rate-driven competition for deposits,” he said, adding that market movements could trigger some shifts in household savings.
