In a precursory move towards reducing lending rates, State Bank of India (SBI) reduced its deposit rates across maturities by 25 basis points effective June 1, 2009. The bank?s newly appointed chief financial officer, SS Ranjan, said lending rates should come down now as cost of fund had already come down and the interest rates? movement was looking southward. Talking about credit offtake in SBI, Ranjan said though this was a lean period, business was taking place on the policy side as demand in most of the sectors had slightly picked up. However, he refused to say when the bank would take a call on lending rates. Other banks are now expected to follow suit.
At his first meeting with chief executives of the public sectors banks after assuming office, finance minister Pranab Mukherjee on Wednesday had called for further cuts in lending rates to provide cheaper credit to industry and consumers to spur growth. He had voiced serious concern over the non-availability of bank credit at affordable rates, especially as they were not in sync with the signals emanating from RBI.
Following the meeting, SBI chairman OP Bhatt had hinted that there was scope for deposit and lending rate-cuts by his bank.
However, the country?s second largest lender, ICICI Bank made it clear it had no plans to go for any rate cut as of now. Talking to FE, ICICI Bank MD & CEO Chanda Kochhar said, ?We were the first to join the latest rate cut spree by reducing our lending rates by 50 basis points 10 days back. Hence there is no plan as of now to go for any further rate cut.?
Other public sector banks are all expected to take a call sometime this month after their asset and liabilities committees (Alco) meet.
According to Bank of Maharashtra CMD Allen CA Pareira, ?We will keep in mind the time bucket and credit flow when our Alco meets within a week.? He added at present over 50% of lending cases in the bank were being done below BPLR.
Allahabad Bank CMD KR Kamath said banks were operating in a falling interest rate regime and hence there were expectations of rate cuts. ?But, the problem is the lag effect. If you cut lending rates, it applies to the new customers only but same is not the case with the deposit rates.?
Bank of India executive director M Narendra said his bank has already reduced deposit rates early this year and will look at lending rate cuts only when its Alco meets the next week. Narendra said there was room for 25-50 basis points cut in interest rates.
Uco bank CMD SK Goel also said there was a scope of 50-100 basis points cut on both deposit and lending rates and the Alco meeting would take a final call on June 19. Indian Overseas Bank CMD SA Bhat also said his bank would take a call when its Alco meets later this month.
Meanwhile, as per SBI?s revised rates, the domestic term deposits with 15-45 day maturity will attract an interest rate of 3% now as against the existing rate of 3.25%. Similarly, over 1,000-day maturity deposits will earn an interest rate of 7.50% as against the existing rate of 7.75%.
An additional 50 bps for deposits of senior citizens for 1-year & above tenure would continue for term deposits below Rs 1 crore. Nearly a month ago, the bank had reduced its deposit rates for various maturities to the extent of 50 basis points.
