Mumbai: After leading lenders, the State Bank of India (SBI) and IDBI Bank reduced their interest rates, atleast two more public sector banks are likely to trim their lending, deposit rates this week.
State-owned lender, the Bank of Baroda (BoB) plans to cut its deposit rates in various maturities by 0.5-0.75% while Kolkata-based Uco Bank has decided to reduce its lending and deposit rates by 0.5%.
“We plan to reduce deposit rates by 0.50-0.75% in various maturities in the near future. Once the deposit rates ease, we may also examine scope for lending rate reduction,” Bank of Baroda chairman and managing director M D Mallya told PTI here.
The Asset Liability Committees (ALCO) of both these banks are scheduled to meet this week to decide the same.
BoB had reduced its Benchmark Prime Lending Rate (BPLR) by 0.5% to 12% effective from 1 April.
“Cost of deposits are still high, which needs to come down. Once the deposit rates ease, that would give room for banks to bring down their lending rates as well,” UCO Bank CMD S K Goel said.
”We are looking for a 0.5% reduction in both lending and deposit rates,“ Goel said.
An expected revival in the economy is likely to push the credit demand in the banking system in the months ahead, he said.
“The average credit growth in 2008-09 was 19%. This figure is likely to be in the range of 20-21% in the current fiscal,” Goel said.
After the Reserve Bank of India (RBI) cut its key-rates since October last year to ease liquidity and arrest high inflation, there was surplus liquidity in the banking system that will enable banks to soften their rates further, he added.
RBI governor D Subbarao had recently said that banks were yet to cut their lending rates as much as warranted by the monetary policy.
Shortly after Subbarao met bankers last week ahead of the monetary policy, leading lenders like State Bank of India and IDBI Bank reduced their deposit rates by up to 0.5%.
Indian Banks Association’s chairman, T S Narayanasami had said that banks are likely to reduce lending rates by 0.5% and deposit rates by 0.5-0.75% in two to three weeks.