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Home / India / PSU banks set to lower lending rates

PSU banks set to lower lending rates

State-owned banks are likely to reduce their prime lending rates by about 50 basis points in the next few weeks, reports Mahua Venkatesh.

india Updated: Feb 02, 2009, 21:47 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times

State-owned banks are likely to reduce their prime lending rates by about 50 basis points in the next few weeks. Bank chiefs said that a decision on the issue would be taken after doing a thorough market survey and assessing the costs of funds.

PSU bank chiefs however maintained that credit growth would also be driven by a general appetite for demand and not solely on the level of PLR.

The government has already directed the banks to ensure that the stimulus package is well supported and implemented. It may be noted that this was the first meeting held between the finance ministry and bank chiefs after the announcement of the stimulus package.

When asked whether the State Bank of India would reduce its lending rate, OP Bhatt, chairman, said, “There is a thinking.” The bank’s PLR is at 12.25 per cent at present. The quantum of reduction is yet to be determined, though it would not be less than 25 basis points, he added

Canara Bank chairman and managing director AC Mahajan said overall interest rates will have to come down in the next few weeks. “We are definitely reviewing the market and will take a call only after that,” he said, adding that there is room to cut PLR by about 50 basis points.

Echoing the same sentiments, SK Goel, CMD, UCO Bank said that though his bank has just brought down PLR a further cut will be still looked at in the next 15 days. “UCO Bank has just reduced its PLR by 50 basis points effective from February 1 but we will take a call on a further rate cut by the 15th of the month,” he pointed out.

Bankers said that the liquidity situation is comfortable at present. “However the appetite for demand is not very high, we cannot force people to take loans,” a PSU bank chairman who did not wish to be quoted told Hindustan Times.

Meanwhile, deposit rates are set to fall as well, as bankers prepare to cut lending rates. “We will have to bring down deposit rates too to keep a balance on the cost of funds,” he said.

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