Quick on the heels of the government announcing the third stimulus package, state-owned banks are poised to announce interest rate cuts this week to pace up the slowing economy. The two large public sector banks, State Bank of India and Bank of India, along with other public sector banks, are planning to cut both lending and deposit rates. The asset-liability management committees (Alcos) of SBI and BoI are meeting this week to take decisions to this effect.
TS Narayanasami, chairman and managing director of Bank of India, said that he would return to the city on Monday with a view to take a call on a rate cut. Narayanasami also confirmed that his bank is looking at reducing its benchmark prime lending rate to the extent of 50 basis points. Similarly, MS Sundara Rajan, CMD,Indian Bank, has hinted that his bank is looking at reducing interest rates on deposit and lending by 50 basis points each, when his bank?s Alco meets his week. ?However, we are also looking at the Reserve Bank of India (RBI), which is likely to take a call on the policy and signal rates soon?, said Rajan.
Rajan mentioned that since Indian Bank was not chasing high-cost bulk deposits and its cost of deposits had come down, a cut in the lending rates would not be a problem for the bank. It would be a pure business decision, he added.
The Alco of Bank of Baroda (BoB) will also be meeting this week. However, in this case things could be a tad different. Said MD Mallya, chairman & managing director; ?We will be taking a call on our lending rates when our Alco meets this week.? He also mentioned that the rates could be hiked in the case of BoB. ?Things could also be otherwise too as our interest rates on lending for vehicles and other avenues are already quite low.?
Analysts would be watching out for private sector and foreign banks to announce similar measures. Reserve Bank governor D Subbarao had met top executives of public sector banks, private sector and foreign banks on Friday to exchange views on the interest rate and credit offtake scenario. After the meeting, ICICI Bank CMD KV Kamath had mentioned that the bank would look at bond rates and movements before taking a call on a rate cut.
However, taking a cue from the meeting, the next day, Punjab National Bank and Union Bank of India announced a reduction in their interest rates on home and vehicle loans in the range of 50-150 basis points to be effective from March 1.
