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PNB too cuts rate by 50 bps

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BS Reporter Mumbai
Last Updated : Feb 05 2013 | 3:21 AM IST
Punjab National Bank (PNB), the country's third largest lender, today followed its peers to lower its benchmark rate, giving in to the government's wish that rates needed to fall to boost consumer lending.
 
PNB cut its PLR by 50 basis points to 12.50 per cent.
 
The growth in lending for purchase of homes, cars, trucks and consumer durables has slowed significantly with interest rates on loans rising by about 400 basis points over the last one year. This has led to the year-on-year growth in total credit dropping to 22.8 per cent as on February 1, 2008, from 29.7 per cent a year earlier.
 
Bankers, not wanting to be quoted, said the reduction in lending rates were unlikely to lead to any increase in demand for home loans as residential property prices in the top 7-8 cities had gone up by at least 100 per cent over the last couple of years. Home loan disbursement in major cities was the key driver of retail credit in the previous three years.
 
All banks were reluctant to reduce their prime lending rates (PLRs) after the Reserve Bank of India (RBI) kept policy rates unchanged at its monetary policy review on January 28, with some of them saying they could not "afford" to do so. State Bank of India (SBI), the largest lender, made a token 25 basis points reduction in its PLR a day before public sector banks were to meet Finance Minister P Chidambaram on February 12 for a review of the banks' performance in the third quarter ended December 31, 2007.
 
After the meeting, chiefs of large public sector banks, including PNB Chairman K C Chakrabarty, met over lunch to discuss Chidambaram's appeal to make credit affordable and help negate the impact of slowing credit on the growth of the economy. 
 
CREDIT OFFTAKE PLUNGES
Deployment of non-food bank credit
Sector/ IndustryOutstanding as
on Nov 23, '07
Rs crore
Year-on-Year variation
24-Nov-06
Rs crore
In %23-Nov-07
Rs crore
In %
Non-food gross bank credit19,26,5503,66,63830.43,52,28722.4
Agriculture and allied activities2,32,12445,78831.540,86321.4
Industry (small, medium and large)7,55,4401,22,98425.61,52,34625.3
Small scale industries1,30,28416,85021.133,25934.3
Personal loans4,88,4131,05,03435.081,45120.0
Housing2,46,68953,19833.432,42415.1
Advances against fixed deposits39,2691,6715.46,36019.3
Credit cards16,9513,56443.35,15743.7
Education18,9924,15747.45,85644.6
Consumer durables9,08195711.2-419-4.4
Services4,50,57392,83233.377,62720.8
Transport operators29,6149,67681.47,90336.4
Professional & other services24,8616,48052.85,94131.4
Trade1,11,83523,61334.416,82817.7
Real estate loans50,66016,60377.712,56333.0
NBFCs53,4006,85025.518,55553.3
 
SBI, Canara Bank, Bank of Baroda, Bank of India and Union Bank of India had reduced their PLRs by 50 basis points. SBI and Canara Bank did it in two equal tranches.
 
As on November 23, 2007, the period for which disaggregated data are available, the year-on-year retail loan growth has fallen to 20 per cent from 35 per cent a year earlier. The fall in home loan growth was sharper at 15.1 per cent against 33.4 per cent a year earlier.
 
The growth in loans for commercial vehicles too has fallen sharply to 36.4 per cent as on November 23 from 81.4 per cent a year earlier. Home loans account for more than half of the retail loans.
 
About 43 per cent of the incremental non-food credit up to November 23, 2007, has been absorbed by industry against 34 per cent a year earlier, while the share of retail loans in the total incremental credit has dropped to 23 per cent from 29 per cent a year earlier.

 

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First Published: Feb 26 2008 | 12:00 AM IST

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