Millennium Post

Banks likely to cut rates after central bank move

Borrowers could see better days ahead as banks are expected to cut lending rates following the Reserve Bank of India's decision to unlock Rs 17,000 crore by slashing cash reserve ratio [CRR] by 0.25 per cent.

Soon after the RBI unveiled its mid-quarter review of the monetary policy, several bankers hinted that they may reduce lending rates in the coming days.

Commenting on RBI's action, the State Bank of India chairman Pratip Chaudhuri said the bank would review its rates in the light of policy decision. The Asset Liability Committee [ALCO] of bank is expected to meet soon to take a view on rate revision.

'It is a very positive move. I think the RBI has given a clear signal that they [banks] are willing to respond and that they [banks] have taken note of the signs of deceleration in economy,' Chaudhuri said.   RBI on Monday announced cut in CRR, the percentage of deposits banks keep with central bank, to 4.5 per cent.

However, repo rate, at which the central bank lends to the banks, would remain unchanged at 8 per cent. The reverse repo, at which it absorbs excess liquidity through borrowings from banks, remains at 7 per cent.

Terming the policy action strongly positive for the markets, Bank of Baroda chairman and managing director M D Mallya said as much as Rs 720 crore of additional fund would come to the bank.

The liquidity infusion would ensure adequate flow of credit to productive sectors of the economy, Mallya said, adding that the bank's ALCO would meet soon to take stock of the situation.

Oriental Bank of Commerce [OBC] chairman and managing director S L Bansal also said that the bank would take a view on the rate revision in its ALCO meeting soon.
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