Home / Money / Personal-finance /  How deposit and lending rates of leading banks have changed

Mumbai: Since January this year, the Reserve Bank of India (RBI) has cut its repo rate by 75 basis points (bps), in three instalments, to 7.25%. While banks have been quick to pass on this reduction to their depositors, borrowers have not enjoyed the benefit fully.

A basis point is one-hundredth of a percentage point.

Large lenders such as State Bank of India (SBI), ICICI Bank Ltd, Punjab National Bank, HDFC Bank Ltd and IDBI Bank Ltd started trimming their deposit rates across various maturity periods since October last year, and reduced them by 75-100 bps.

However, reduction in lending rates was much less, with major banks announcing a cut of only 25-35 bps in their base rates, the minimum lending rate for banks. Moreover, a majority of banks cut lending rates only in April, after being prodded by RBI governor Raghuram Rajan. In April, after having announced two consecutive rate cuts since January, RBI pointed out that banks had no excuse to refrain from bringing down their lending rates.

At SBI, the base rate is down at 9.7% after two reductions of 15 bps each in April and June. Similarly, both ICICI Bank and HDFC Bank brought down their base rates to 9.7% each from 10% between April and June. Private sector lender Axis Bank Ltd announced a 30 bps reduction in its base rate between April and June, bringing it down to 9.85%.

Punjab National Bank and IDBI Bank announced a 25 bps reduction in their respective base rates in May, bringing it down to 10% each. Bank of Baroda joined in with two consecutive rate reductions in May and July, adding up to a 35 bps cut, bringing its base rate down to 9.95%.

The reluctance of banks to reduce their lending rates aggressively is due to their insistence on maintaining their margins, as credit growth continues to remain under pressure.

As on 10 July, outstanding non-food credit for the banking industry stood at 65.62 trillion, up only 9.7% from the same period a year ago, according to the latest RBI data. This is much lower than the expected 13-15% credit growth which most large banks are expecting over the course of the fiscal year ended 31 March 2016.

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