Bankers have said a lending rate cut is unlikely this month even as the Reserve Bank of India (RBI) in its monetary policy review on Tuesday
lowered repo rate by 25 basis points.
The central bank slashed short-term lending rate by 0.25 per cent to 7.5 per cent, which the bankers read as not enough for an immediate cut in their lending rates.
Accordingly, the short-term borrowing rate would also come down to 6.5 per cent. However, the
Cash Reserve Ratio (CRR) has been retained at 4 per cent on the expectation that government will start spending more.
"Banks would cut the lending rate when deposit rates, both short-term and long-term, start showing a decline. Base rate may not be cut at this point of time," Indian Overseas Bank Chairman and Managing Director M Narendra said.
Status quo will be maintained till the end of March and thereafter the bank would assess the liquidity condition and take a view on the rate cut, he said.
Some bankers said they will wait for further
signals from RBI before lowering rates for home and auto loans.
According to Central Bank of India Chairman and Managing Director M V Tanksale, the reduction is on expected lines and it shows that RBI is supportive of growth.
"This certainly will reduce the cost of borrowing for the banks but I cannot say how it is going to shape up in the reduction of the base rate. We will discuss this issue with our ALCO (Asset Liability Committee) as we have upwardly revised our deposit rates recently," he said.
There is no disappointment on the CRR cut as the liquidity deficit in the system is not much and the credit growth is not that significant, he added.
"Immediate transmission before the end of March, I think will not be possible from the bankers side," Bank of India Chairperson and Managing Director V R Iyer said.
Terming the monetary action as on expected lines, Bank of Baroda Chairman and Manging Director S S Mundra said: "There is certain direction which is visible to us. I don't see any immediate action. But come April or mid-April there would be much clarity on liquidity position."
However, SBI Chairman Pratip Chaudhuri had on Monday said his bank has been passing on the benefit of policy rate cut. "We have always done that," Chadhuri had said when asked if the bank would pass on the benefit of the rate cut.
"Of course, it would be commensurate with the rate cut because its competitive scenario, who can hold it back," Chaudhuri had said.
In its third quarter policy review on January 29, RBI had lowered key repo rate by 0.25 per cent. It also had injected Rs 18,000 crore liquidity through similar reduction of Cash Reserve Ratio (CRR).
Following the move, several lenders, including State Bank of India (SBI), Indian Overseas Bank, Bank of Baroda and IDBI Bank had cut lending rates.
With inputs from PTI
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