Banks take cue from RBI, cut rates

Banks have started cutting lending and deposit rates. After the Reserve Bank of India announced a 50-basis-point cuts in repo and reverse repo rates on Wednesday, at least three public sector banks announced a reduction in lending and deposit rates.

However, private sector banks such as ICICI Bank and HDFC Bank are yet to take any decision.

The banks that cut lending rates on Thursday include Bank of Baroda, Union Bank of India and United Bank of India.

BoB and Union Bank of India lowered the prime lending rate by 50 basis points to 12 per cent with effect from April 1.

The Kolkata-based United Bank of India cut the PLR to 12.5 per cent with effect from March 5.

A lower PLR will lead to a cut in the rates for all loans, including home and auto finance.

BoB also reduced deposit rates by 50-75 basis points, across various maturities. Following the cut, the peak rate the bank is offering is 8.5 per cent for a 750-day deposit, said MD Mallya, chairman and managing director.

“We have cut rates pursuant to the strong signal by the RBI. By and large, the bias is strongly southwards for interest rates. Since the revised rates are effective from April 1, we will not see much of an impact this fiscal,” Mallya said.

About the central bank’s concerns about asset quality, Mallya said BoB is taking measures to ensure proper monitoring and to allow restructuring of advances in case of difficulties faced by genuine borrowers.

“It is a challenge faced by the banking industry and we should be able to manage,” Mallya said.

United Bank of India cut deposits rates by 25-50 basis points across various maturities effective March 6.

Union Bank of India’s highest deposit rate is 8 per cent, which is one of the lowest in the industry, said S Raman, executive director.

On Wednesday, Canara Bank said it will cut interest rates on home and vehicle loans. The bank will also cut deposit rates by 25-75 basis points with effect from March 11.

While reducing its key rates on Wednesday, the RBI said, “It is expected that the reduction in the policy interest rates will further encourage banks to provide credit for productive purposes at viable interest rates.”