Mumbai: After a fresh dose of monetary measures Friday, home, consumer and corporate loans are likely to soften further with a steep 1% cuts in key short-term rates and injection of Rs20,000-crore liquidity into the sytem.
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“Both lending and deposit rates should come down further in the wake of the current monetary actions from the Reserve Bank. With the cost of funds coming down, banks would be willing to lend to productive setgments,” leading public-sector lender, Bank of Baroda’s Chairman and Managing Director, M.D. Mallya told PTI.
In order to propel growth and ensure credit availability in the market, the Reserve Bank had cut its cash reserve ratio, the amount banks need to park with the RBI, by 0.5% to 5%, from 17 January to inject Rs20,000-crore into the market.
With this, the RBI would have pumped into the fianncial system Rs300,000- crore through various meausres since October.
The banking regulator also reduced the short-term repo and reverse repo rates by 1% each to 5.5% and 4% respectively making lending and borrowing by banks from the apex bank cheaper.
BoB’s Asset Liability Management Committee, or Alco, is likely to meet in the next few days to assess the impact of the monetary measures and take a decision on reducing interest rates.
Country’s largest private-sector lender, ICICI Bank said that Friday’s policy actions are expected to prompt banks to reduce their lending and deposit rates further.
“We could expect a bottoming out of government bond rates further decline in deposit and lending rates from the currrent levels. This should lead in greater credit availability and demand,” ICICI Bank’s CEO-elect Chanda Kochhar said.
Leading private sector lender, Axis Bank said it would look at the possibility of a 0.25-0.5% reduction in its prime lending rate and a 0.5-1% cut in its deposit rates across various tenures. Axis Bank’s PLR presently stands at 15.75%.
“We will see that possibility (of interest rate cuts). The asset liability committe will meet by January-end to take a decision on the matter,” Axis Bank’s Head of Credit, Partha Mukherjee said.
New-age private sector lender, Yes Bank’s Manging Director & CEO, Rana Kapoor also echoed the same view saying the policy actions were primarily aimed at supportinig the growth of the economy and has given a clear signal for banks to reduce their rates.
Yes Bank’s Alco would meet in this month to cut its lending and deposit rates further, Kapoor said. The lender may slash its PLR by another 0.5% and deposit rates by 0.5-1% across different tenures. The bank had effected a cut in its PLR last month.
Government-owned lender, IDBI Bank is also likely to reduce its interest rates further in the near future following the rate cuts from the Reserve Bank, its Chief Financial Officer, R.K. Bansal said.
“This is a clear signal for banks to lower their rates. We will assess the impact of the monetary actions and will take appropriate steps in the near term,” Bansal said.