Bankers Begin Rate Cut War Despite RBI

Mumbai, Nov 3: | Updated: Nov 4 2003, 05:30am hrs
The Reserve Bank may have kept the crucial rates untouched in its mid-term Credit Policy review, but the banks are gearing up to effect rate cuts - ranging from 25-50 basis points - for their advances and deposits very soon.

The Mumbai-based Central Bank announced a lending rate cut of 50 basis points on Monday.

Meanwhile, State Bank of India chairman AK Purwar said the bank is undertaking a comprehensive review of its rates across-the-board and will announce the revised rates soon. I have always maintained that the domestic interest rate will have a softer bias as globally the rates are low, the chairman of the countrys largest commercial bank told FE, adding the country cannot remain isolated in the interest rates scenario. However, SBI has to take into confidence the Indian Bank Association before finalising the rate cut.

The countrys second-largest commercial bank, ICICI Bank, is also closely watching the market developments. We would review the existing rates at an appropriate time, said executive director Kalpana Morparia.

If our funding costs come down due to changing market developments caused by various measures by the central bank, we will revise our rates downward, she said, adding, now every bank would evaluate its own asset liability and decide the rates.

The central bank may not have given a direct signal, but has given a strong indirect signal about its intentions to ensure softer interest rate in the system by asking banks to revamp the credit system of agricultural and small scale industry, Mr Purwar added.