BUSINESS

Banks expect more relief from RBI

Source:PTI
October 24, 2008 18:15 IST

Indian banks on Friday indicated that borrowers could be given relief by way of interest rate cut subject to inflation coming down and their getting further relief from the apex bank.

"More relaxations are warranted going forward, given that this is the busy season," said Yes Bank managing director and CEO Rana Kapoor.

However, RBI Governor D Subbarao, after unveiling the mid- term review of the credit policy said RBI has given signals on interest rates and it was for the banks to cut rates.

"We signal interest rates. It is for the banks to take a decision on what their interest rates should be," Subbarao said while responding to a query on whether interest rates would soften.

While Kapoor expects lending and deposit rates to remain unchanged in the near-term, the Punjab National Bank executive director J M Garg said, interest rates would come down with further easing of inflation and some more policy action from RBI side.

Softening of rates is a possibility but not immediately, Garg said.

RBI on Monday slashed short-term lending (repo) rate by 100 basis points to 8 per cent signalling softening of interest rates.

According to the UCO Bank Chairman S K Goel, "There is possibility of interest rates heading downward. PLR (Prime Lending Rate)

may comedown." 

The bank would take a view on interest rates next week, he said.

Echoing similar views Bank of Maharashtra chairman and manging director Allen Pereira said, "I think in the next 15 days banks will rework cost and some decision on lowering interest rates can be taken".

Fresh loans would become cheaper in a month or so. But a cut in PLR would take a while, he said.

In the past couple of months, most of the banks have mobilised short-term deposits at high cost. Lending rate would soften only when the cost of fund is pared, he added.

Oriental Bank of Commerce executive director H Ratnakara Hedge said rates  both lending and deposit  would decline in a month or two.

One cannot expect change in rates immediately, he said, adding system is yet to stabilise.

Another dose of repo cut could be bring in relief to the banking sector, he added.

According to Indian Bank chairman and managing director M S Sunderarajan there is virtually no change in the policy. It would be difficult for the banks to bring down lending rate in the short term.

Source: PTI
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