Banking industry of the country is not in a hurry to reduce its deposit and lending rates following a 100 basis points repo rate cut to 8% by the Reserve Bank of Indian on Monday.
However, Union Bank of India reduced rates of interest on home loans up to Rs 30 lakhs by 50 bps effective from October 21.
The interest rates on housing loans of over Rs 30 lakh will avail the benefit of 25 bps in card rates as part of festival offer. The new rates will be applicable to all home loans sanctioned on or after October 21.
Chanda Kochhar, joint managing director, ICICI Bank, said that the RBI move signaled its focus on ensuring sufficient liquidity and smooth functioning of financial markets to support growth. “This is clearly an easing of monetary policy but the impact on lending and deposit rates will have to be seen over time.”
KC Chakrabarty, CMD, Punjab National Bank, said, “After already having reduced our rates on home loans by 50 basis points after the 250 basis points CRR cut by the RBI, there is no scope for my bank to go for further rate cuts as of now. But, we will continue, with the offer even if the festive season was over.”
“As regards our expectation for further RBI move, we will have to wait and watch,” he added.
MD Mallya, CMD, Bank of Baroda, said that the RBI’s measure should give lots of confidence to the market.
“It is a signal towards the interest rates going southwards. I think the deposit rates will also come down and the cost of raising deposits would fall and softer lending rates are possible,” he added.
AC Mahajan, CMD, Canara Bank said, “I think that further cut in SLR between 1-2% will be a welcome gesture by the RBI. The liquidity has certainly eased for the time being. Secondly, busy season has started now and it will generate demand for the credit to take off and for the time being we are comfortable.”
Alok Mishra, CMD, Oriental Bank of Commerce, said that it was an indication that the interest rates would come down. But, the deposit rates were not coming down despite there was liquidity in the market, due to lag effect. Deposit rates will have to come down first before thinking of the lending rates to come down.
Allen CA Pareira, CMD, Bank of Maharashtra, said that the RBI move could not bring down rates immediately as the banks have been raising deposits at high interest rates for 2-3 years now.
“You can’t lower your rates on deposits immediately as you will be losing your margins immediately by doing so. So the banks will have to work out how to lower their lending rates. I think that there can be relaxation in lending rates by 100 basis points, but after some time,” he explained.