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Cheaper loans? Not so soon

If you are waiting to see a cut in your home or car loan rate after Monday’s cut by the RBI in its signal repurchase (repo) rate by one percentage point, you may have to wait longer, reports HT Correspondents.

india Updated: Oct 20, 2008 22:40 IST

If you are waiting to see a cut in your home or car loan rate after Monday’s cut by the Reserve Bank of India (RBI) in its signal repurchase (repo) rate by one percentage point, you may have to wait longer. Bankers are waiting to see what it does to their costs – and that may take a couple of months.

There is nothing on the horizon to suggest a deposit rate cut either, because the RBI has freed up more than Rs. 1,00,000 crore from its cash reserves since October 11. The Prime Lending Rate (PLR) that bankers set is yet to take a cue from the repo.

“We will have to see the cost of borrowing and the deposit rates before deciding to cut PLR. The decision cannot be taken immediately in a hurry,” said K C Chakrabarty, chairman of Punjab National Bank.

Mortgage lender HDFC’s managing director Keki Mistry said he expected lower rates over a period of time, but lenders have to first unwind the burden of not having passed on rate increases over the past six weeks.

With long-term deposit rates currently at around 10.5 per cent, up from 9 per cent a few months ago, bankers have been coping with a shortage of cash and increased cost of funds.

Chanda Kochhar, ICICI Bank’s Joint Managing Director and CFO, said the repo rate cut “is clearly an easing of monetary policy but the impact on lending and deposit rates will have to be seen over time.”

Bank of India chairman TS Narayanasami said he would wait for a month or to and take a decision on rates “after analysing the overall situation.”