Last week, the country's largest lender State Bank of India (SBI) reduced its lending rate for home and auto loans by 0.05 percentage point.
To a question, if recapitalisation in public sector banks by government could lead to increase in interest rate, he said, "quite possible."
There may be 10-15 basis point spike following the issuance of recapitalisation bonds leading to an increase in yield, he said on the sidelines of an event organised by Bhartiya Yuva Shakti Trust here.
Last month, the government unveiled Rs 2.11 lakh crore two-year roadmap for strengthening NPA-plagued public sector banks, which include recapitalisation bonds, budgetary support, and equity dilution.
The balance will be raised by banks from the market by diluting government equity. The government's equity dilution would help banks raise about Rs 58,000 crore. The government equity, as per the current policy, can come down to 52 per cent in state-owned banks.
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