The bank had cut rates by five bps for the three-month, six-month and one-year tenors as on March 1.
ICICI Bank on Monday cut the marginal cost of funds based lending rate (MCLR) across tenors by five basis points (bps) ahead of the Reserve Bank of India’s (RBI) monetary policy meeting later this week.
ICICI Bank cut rates for the overnight, one-month, three-month, six-month and one-year tenors by five basis points (bps) to 8.50%, 8.50%, 8.55%, 8.70% and 8.75% respectively, according to the lender’s website. The RBI, in its bimonthly policy review in February, had cut the key repo rate by 25 bps to 6.25%. ICICI Bank’s overall advances rose by 12% year-on-year (y-o-y) to nearly `5.64 lakh crore as of December 2018.
“Muted loan growth on the domestic corporate lending side remains a drag as there is a large share of loans that the bank is looking to reduce its exposure,” analysts at KIE said. “Loans to domestic corporates were flat y-o-y whereas international lending (mostly wholesale) was down 5% y-o-y, a trend similar to previous quarters. Retail loans, however, continued to witness strong growth at 22% y-o-y,” they added.
Growth in the bank deposits at 9.8% y-o-y in the fortnight ended on March 1 slowed down compared with the growth of 10.2% y-o-y, which was highest in one-and-a-half years, in the fortnight to February 15, showed RBI data.
“Lower deposit growth has meant a steady rise in the CD ratio on a stock basis, which is expected to touch 78% by the end of FY19, compared with 74% in FY18 and 73% at the end of FY17,” said Crisil senior director Krishnan Sitaraman, adding: “Banks will need to raise at least `19-20 lakh crore of fresh deposits until March 2020.”
The RBI in December proposed to change the way banks price their loans to an external benchmark rate like the Repo rate or the 91-day or 182-day treasury bill instead of the MCLR. “The challenge for the banks, not just for us but all the banks, will be how closely correlated the benchmark will be with our actual funding cost. The good thing is that we have to do it on the mortgage portfolio and the MSME portfolio to start with,” said Rakesh Jha, CFO, ICICI Bank.
ICICI Bank had last cut its MCLR on one-month, three-month and six-month tenors by 10 bps each to 8.55%, 8.60% and 8.75%, respectively, in December 2018. “ICICI Bank’s loan growth at both consolidated book level & standalone levels have been similar; we believe that loan growth at subsidiaries is coming from higher risk-weight asset class,” analysts at Jefferies said.
Kotak Mahindra trims MCLR by 10 bps for one-year tenors
Private-sector lender Kotak Mahindra Bank also trimmed the MCLR by 10 bps for a one-year tenor and by five bps for the two-year and three-year tenors to 8.9% and 9%, respectively. The bank had cut rates by five bps for the three-month, six-month and one-year tenors as on March 1.