Punjab National Bank, the country's second largest state-run lender, today said there is no further scope for the banks to slash their lending rates.
"I do not see interest rate coming down in the recent scenario. If it does, it would be marginally. There is always a scope for it (cutting interest rate) but there is not that much scope now," PNB CMD K C Chakrabarthy told reporters here.
Indian Banks' Association (IBA) Chairman T S Narayanasami had also said yesterday that there is no more headroom for banks to cut their prime lending rates (PLR) and deposit rates in the near future.
When asked if the government's borrowing might lead to low interest rate regime, Chakrabarthy said, "Interest rate will come down not on borrowing programme. It will come down based on what is inflation rate, what is expected inflation rates and cost of resources."
Interest rates will come down provided banks are able to reduce their cost of deposits, he added.
Yesterday, the government said that it will borrow an additional Rs 1,40,000 crore during the first half of fiscal 2009-10 to fund increasing public expenditure.