ICICI Bank cuts rates, others to follow
The Financial Express, April 22, 2009, Money & Funds, P II
Agencies, fe Bureau, Mumbai
The country's largest private sector lender ICICI Bank was the first to cut interest rates on Tuesday after the RBI lowered its short-term lending and borrowing rates, but housing loan major HDFC said it has no plans to cut the rates now. In fact, it was private sector banks which were reluctant to cut lending rates earlier when the RBI had eased money supply through a series of rate cuts.
ICICI Bank cut both lending and deposit rates by up to 50 basis points. Describing the RBI's stance as an "innovative and far-reaching policy," ICICI Bank's managing director & CEO, KV Kamath, said it would have a significant impact (on spurring economic growth).
HDFC's chairman Deepak Parekh said, "We have no plans to lower our interest rates as of now".
However, other bankers said they would slash lending rates in the coming days taking cues from RBI cutting key rates by 25 bps. “It (the RBI rate cuts) is a very clear-cut signal that interest rates should ease,” SBI chairman OP Bhatt said.
“As far as my bank (UCO Bank) is concerned, we are going to reduce our BPLR by 0.25%,” UCO Bank chairman and managing director SK Goel said after meeting with RBI governor D Subbarao.
The Kolkata-based bank will be holding its board meeting in the next 10-15 days and a decision on a rate cut would be taken then, he said.
Meanwhile, RBI governor in his customary press meet said, “Indeed, the further policy rate cuts effective as a part of this policy should be a definitive signal for reducing lending rates.” The governor noted that the reduction in interest rates by banks across the term structure and across markets has not been uniform. “Let me therefore reiterate that there is scope for the overall interest rate structure to adjust downwards.”
Canara Bank and Central Bank are planning to hold ALCO meeting in the coming days to review interest rate scenario post annual policy announcement. “We will take a view on interest rates in ALCO,” Canara Bank CMD AC Mahajan said. Acknowledging that banks did not respond swiftly to policy rate cut, RBI said the adjustment in market interest rates in response to changes in policy rates gets reflecte with some lag. However, transmission to the credit market is somewhat slow on account of several structural rigidities, it said.
RBI has reduced repo rate from 9% in October 2008 to 4.75% now, while it brought down reverse repo rate from 6% in October last year to 3.25% at present. In response, most of banks reduced the lending rate by 200 basis points in the same period.
ABN Amro interim country executive Madan Menon said rate cut would induce some more downward adjustment in banks' cost of funds and lending rates. “A 25 bps cut in the policy rates is along anticipated trends. We expect that RBI could now move gradually on the policy rates front, given that liquidity in the system is comfortable, overall monetary conditions are significantly easy and bank lending rates have trended lower.”
The Financial Express, April 22, 2009, Money & Funds, P II
Agencies, fe Bureau, Mumbai
The country's largest private sector lender ICICI Bank was the first to cut interest rates on Tuesday after the RBI lowered its short-term lending and borrowing rates, but housing loan major HDFC said it has no plans to cut the rates now. In fact, it was private sector banks which were reluctant to cut lending rates earlier when the RBI had eased money supply through a series of rate cuts.
ICICI Bank cut both lending and deposit rates by up to 50 basis points. Describing the RBI's stance as an "innovative and far-reaching policy," ICICI Bank's managing director & CEO, KV Kamath, said it would have a significant impact (on spurring economic growth).
HDFC's chairman Deepak Parekh said, "We have no plans to lower our interest rates as of now".
However, other bankers said they would slash lending rates in the coming days taking cues from RBI cutting key rates by 25 bps. “It (the RBI rate cuts) is a very clear-cut signal that interest rates should ease,” SBI chairman OP Bhatt said.
“As far as my bank (UCO Bank) is concerned, we are going to reduce our BPLR by 0.25%,” UCO Bank chairman and managing director SK Goel said after meeting with RBI governor D Subbarao.
The Kolkata-based bank will be holding its board meeting in the next 10-15 days and a decision on a rate cut would be taken then, he said.
Meanwhile, RBI governor in his customary press meet said, “Indeed, the further policy rate cuts effective as a part of this policy should be a definitive signal for reducing lending rates.” The governor noted that the reduction in interest rates by banks across the term structure and across markets has not been uniform. “Let me therefore reiterate that there is scope for the overall interest rate structure to adjust downwards.”
Canara Bank and Central Bank are planning to hold ALCO meeting in the coming days to review interest rate scenario post annual policy announcement. “We will take a view on interest rates in ALCO,” Canara Bank CMD AC Mahajan said. Acknowledging that banks did not respond swiftly to policy rate cut, RBI said the adjustment in market interest rates in response to changes in policy rates gets reflecte with some lag. However, transmission to the credit market is somewhat slow on account of several structural rigidities, it said.
RBI has reduced repo rate from 9% in October 2008 to 4.75% now, while it brought down reverse repo rate from 6% in October last year to 3.25% at present. In response, most of banks reduced the lending rate by 200 basis points in the same period.
ABN Amro interim country executive Madan Menon said rate cut would induce some more downward adjustment in banks' cost of funds and lending rates. “A 25 bps cut in the policy rates is along anticipated trends. We expect that RBI could now move gradually on the policy rates front, given that liquidity in the system is comfortable, overall monetary conditions are significantly easy and bank lending rates have trended lower.”
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