UBI, Union Bank cut rates, others likely to follow soon | business | Hindustan Times
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UBI, Union Bank cut rates, others likely to follow soon

business Updated: Jan 29, 2015 17:19 IST
HT Correspondent
HT Correspondent
Hindustan Times

Your EMIs for home and auto loans will finally get cheaper.

After the the Reserve Bank of India (RBI) sprung a surprise 25 basis points cut in the repo rate, most lenders indicated they would reduce interest rates shortly, while public sector United Bank of India (UBI) and Union Bank of India announced a reduction in their base rate — the minimum lending rate — by 25 and 50 basis points, respectively, to 10%.

The country’s two largest lenders, State Bank of India and ICICI Bank, said this was the beginning of the rate cut cycle and the benefit would “definitely” be passed on to the consumers, but refrained from giving any timeframe.

Most banks would take a final call on the issue after the meetings of their respective asset liability committees (ALCO).

“Definitely I think those cuts (deposit and lending rates) will happen,” SBI chairperson Arundhati Bhattacharya said. “We have been talking for a while now about the easing of the rate cycle and deposit cuts... we believe that this cut may be just the beginning of a rate-easing cycle.”

“Banks will pass on the rate cut benefits to consumers... the movement is in the direction of reduction in interest rates,” ICICI Bank MD and CEO Chanda Kochhar said. “Together with the various initiatives being taken by the government, the rate cut would strengthen the positive momentum in the economy by lowering borrowing costs, as a lower rate regime reflects in bank funding costs over time.”

Banking sources also said a decision on the rate cut could take more than a week as lenders are busy with their quarterly figures and may prefer to wait for the central bank’s monetary policy slated on February 3.

HDFC Bank treasury head Ashish Parthasarthy said interest rate cuts could be announced closer to the Union Budget next month. “You could see some cuts in the base rate, but the timeline would be more nearer to the budget.It will be some time before lending rates are cut.”

Gagan Banga, vice-chairman, Indiabulls Housing Finance, echoed similar sentiment. “It will take some time but lending rates will be cut…some banks have been charging 25-50 basis points lower already. This would lead to lower EMIs and benefit consumers,” he said.