Lending rates to fall, deposit rates to hold, say bankers

Jan 30 2013, 00:41 IST
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Summary* IDBI Bank, National Housing Bank slash lending rates by 0.25%

CMD of the Oriental Bank of Commerce said, “It would depend on the ALCO decisions of individual banks on whether the reduction would come immediately or in a week or two,” he added.

The Indian Overseas Bank said that there is a clear case for policy transmission on lending rates by banks but said that it would be challenging.

M Narendra, CMD, IOB, said, “It will be a challenge for banks to pass on the benefit of the rate cut to push growth and consumption demand without impacting the already slowing deposit growth.”

Punjab National Bank was, however, of the view that economic growth is the need of the hour and hence benefits have to go to the critical areas.

“Today if we are looking at growth in this country fresh investments have to happen. When we said transmission has to happen, it includes other segments like infrastructure and small and medium enterprises,” said KR Kamath, CMD, Punjab National Bank.

Home loan rates set to come down

Home buyers and existing home loan customers can expect some cheer as banks and housing finance companies are looking to pass on the benefits of a CRR cut to customers.

A cut of 25 basis points in the home loan rates would mean the tenure of home loans or EMI’s coming down. For new customers, a 25 bps cut in rates means that for a 20 year home loan the EMI will go down by Rs 17 for every Rs 1 lakh of loan.

Banks and housing finance companies are offering 20-year home loans at 10.5 per cent currently, which is set to go down to 10.25 with the RBI’s move.

A revision by banks in their base rates may also provide some relief to old customers.

“Our Assets Liability Management Committee will sit and examine as to what extent and to what percentage, benefits can be passed onto the customers,” said VK Sharma, director and chief executive, LIC Housing Finance. When asked if the revision will only be for new customers, he said, “We will review the PLR and the benefits will be passed to all.”

The head of another housing finance company said banks will have to first cut the base rate for benefits to be passed on to the existing customers. ENS

Mint street signals


If inflation eases further and the current account deficit moderates, then there will be room for monetary easing



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