Source: News Bharati English17 Nov 2016 15:30:13

New Delhi, November 17: Making his comment over the demonetization policy, New Development Bank (NDB) chief KV Kamath on Thursday said that Demonetisation of high value notes will bring down the interest rates by 1 per cent in the next 3-6 months.

Kamath said that good monsoon lead to downward flow of inflation and the demonetization policy will further decrease the interest rate. "What I am looking at is…. good monsoon, inflation coming down, and in the last quarter, there has been a 70-basis point reduction in headline interest rates, and with this demonetisation, we would see a further drop in interest rates between now and say, 3-6 months, of another percentage point," he said.

Welcoming the move of replacing of the old Rs. 500 and 1000 rupee notes with new notes, Kamath said this in a medium term, in a year or so, will have a salutary effect on interest rates. He reasoned that it will suck out liquidity from the system which should have another positive impact on inflation. 

“Unaccounted money coming out of the system will have a positive impact on inflation, he said, adding that the combined impact of all these would lead to at least 1 per cent cut in the interest rate. Kamath said that every hard step has some pain, which explains the current scenario”.