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Banks may cut lending, deposit rates, say bankers

Banks on Tuesday said they would cut lending rates making home, consumer, corporate and personal loans cheaper after the Reserve Bank slashed short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each in its annual monetary policy for 2009-10.

business Updated: Apr 21, 2009 14:44 IST

Banks on Tuesday said they would cut lending rates making home, consumer, corporate and personal loans cheaper after the Reserve Bank slashed short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each in its annual monetary policy for 2009-10.

"The policy stance of RBI indicates further softening of the interest rates," Oriental Bank of Commerce Executive Director S C Sinha told PTI.

Banks would bring down lending and deposit rates after reviewing their asset liability condition. It may not be immediate but would take some time to respond, he said.

Indian Bank Executive Director A Subramanian said that deposit and lending rates would come down simultaneously. "That is the signal RBI is giving to all banks."

The apex bank cutting down short-term borrowing rate would encourage banks to lend and earn interest income rather parking funds with RBI and earn reverse repo rate, he said.

The Chennai-based bank would take a view on the interest rates in the next few days, Subramanian said. In its annual credit policy, RBI reduced repo rate to 4.75 per cent and reverse repo to 3.25 per cent with immediate effect, while retaining the other key ratios such as the Cash Reserve Ratio, the percentage of deposits that banks keep with the central bank.