Banks rule out deep rate cuts for India Inc
The Economic Times, June 2, 2009, Page 1
Our Bureau MUMBAI
LEADING banks have told corporates that there can be no dramatic reduction in lending rates. While the government is nudging banks to cut interest rates, the latter have told apex industry bodies that rates cannot be lowered to the extent demanded by corporates.
In a meeting last week, the Indian Banks’ Association (IBA), an association of bank managements, spelt out its views to the Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (Ficci).
“We have told corporates that lending rates can be cut by 50-100 basis points (bps) from the current level in the near to medium term,” said a bank CEO who attended the meeting. Corporates have asked for a 400-500 basis point cut in lending rates in the near future. “We reminded them that most of the loans are given at rates below the prime lending rate (PLR) of banks,” he said. Most PSU banks have pegged their PLR, which serves as the benchmark rate, at 12-12.5% while private banks’ PLR varies from 14-16%.
The meeting followed a directive from the government that industry associations and banks should meet regularly to quicken credit flow to the manufacturing sector. The next such meeting will be held after finance minister Pranab Mukherjee meets bank CEOs on June 10 to review the performance of banks. Bankers feel that the FM may ask them to lower lending rates. Several state-owned banks had cut rates in the first week of April ‘09.
The Economic Times, June 2, 2009, Page 1
Our Bureau MUMBAI
LEADING banks have told corporates that there can be no dramatic reduction in lending rates. While the government is nudging banks to cut interest rates, the latter have told apex industry bodies that rates cannot be lowered to the extent demanded by corporates.
In a meeting last week, the Indian Banks’ Association (IBA), an association of bank managements, spelt out its views to the Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (Ficci).
“We have told corporates that lending rates can be cut by 50-100 basis points (bps) from the current level in the near to medium term,” said a bank CEO who attended the meeting. Corporates have asked for a 400-500 basis point cut in lending rates in the near future. “We reminded them that most of the loans are given at rates below the prime lending rate (PLR) of banks,” he said. Most PSU banks have pegged their PLR, which serves as the benchmark rate, at 12-12.5% while private banks’ PLR varies from 14-16%.
The meeting followed a directive from the government that industry associations and banks should meet regularly to quicken credit flow to the manufacturing sector. The next such meeting will be held after finance minister Pranab Mukherjee meets bank CEOs on June 10 to review the performance of banks. Bankers feel that the FM may ask them to lower lending rates. Several state-owned banks had cut rates in the first week of April ‘09.
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