Public sector lenders led by State Bank of India (SBI) today said they will look at further interest rate cuts. SBI chairman O P Bhatt told reporters after a meeting with Finance Minister Pranab Mukherjee that the bank is considering cutting its prime lending rate (PLR) for the second time in as many months
Kolkata-based UCO Bank Chairman S K Goel said the bank may cut lending and deposit rates 200 basis points, with a 100-basis-point reduction likely this month. The bank will also soon launch a scheme similar to SBI’s.
SBI had cut PLR 75 basis points to 12.25 per cent on January 1 and has cut all new home loan rates to 8 per cent for a limited period with a clause to reset rates
In a bid to boost the economy, the Reserve Bank of India (RBI) has taken a series of measures since September last year including cuts in the cash reserve ratio and the repo and reverse repo rates to inject liquidity into the system and signal a soft interest rate regime.
But last week RBI said banks could reduce rates further. Since November, public sector lenders have reduced lending rates up to 200 basis points, while private banks have lowered rates 50 basis points. In contrast, deposit rates have been reduced up to 300 basis points.
Bankers have been reluctant to push lending rates further as they claim that the cost of deposits has not come down significantly. A further reduction in deposit costs will result in investors shifting to small savings schemes such as post office deposits and public provident fund, which offer 8 per cent returns, they said.
