New Delhi: Moody’ s on Thursday said Reserve Bank of India’s (RBI) move to cut its short-term lending rate, the repo rate, by 25 basis points, will have little impact on lending rates by banks, even as ICICI Bank Ltd slashed its rates by 50 basis points and others are likely to follow the suit.
“The modest reduction of 25 basis points to the repo rate will likely have an insignificant effect on commercial rates. A cut of at least 50 basis points is needed in the current environment,” said Moody’s economy.com, a research arm of Moody’s.
RBI had cut the short-term lending rate and the borrowing rate, the reverse repo, by 25 basis points each in its annual monetary policy on Tuesday.
Moody’s said the central bank had already cut the repo rate by four percentage points before this week’s move, but commercial banks had generally trimmed their rates by no more than two percentage points.
Punjab National Bank CMD K.C. Chakrabarty on Thursday said there was a headroom for another 50-100 basis points cut in lending rates, depending on cut in deposit rates.