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PNB rules out hike in lending rates

Amid hike in retail lending rates by some banks, Punjab National Bank has ruled out any change in home and car loan rates.

india Updated: Feb 01, 2006 15:48 IST

Amid hike in retail lending rates by some banks, country's second largest PSU bank Punjab National Bank on Wednesday ruled out any change in home and car loan rates till March while Oriental Bank of Commerce is yet to take a view.

"We are in no way inclined to change our Prime Lending Rate or interst rate on any other segment," PNB chairman SC Gupta said.

He said the bank has improved its net interest margin (NIM) to 4.02 per cent till December 2005 from 3.76 per cent in the year-ago period.

The increase in NIM was possible due to reduction in cost of deposit and improvement in quality of retail and SME lending, which resulted in better yield on advances, he said.

However, Gupta said the bank was discouraging low yield advances for better asset-liability management.

"So, I do not feel any pressure to hike lending rates for the time being," he added.

Another Delhi-based bank, OBC is also yet to decide on increasing interest rate on home and car loans.

Kolkata-based UCO Bank is also undecided about hiking interest rate on retail lendings.

HDFC hiked home loan rates by 0.5 per cent on Tuesday while IDBI Bank on Wednesdayraised retail loan rates by 25 per cent.

India's top two banks State Bank of India and ICICI Bank are also closely watching the developments and are expected to announce their stance on lending rates by this week-end.

The pressure on banks to increase lending rates is rising due to increase in cost of funds, as deposit rates are moving up, besides the recent increase in short term rates by central bank Reserve Bank (repo and reverse repo).

First Published: Feb 01, 2006 15:48 IST