Liquidity in the banking system is very comfortable and overall interest rates need to come down, ICICI Bank Executive Director Sonjoy Chatterjee said.
Easing of rates on wholesale deposits would be the driver for lowering lending rates, Chatterjee said.
“Wholesale deposits have come down by atleast 2 per cent. It is very important for interest rates to come down. We expect interest rates to come down.
Wholesale deposits are drivers of low interest rates. That will reflect in the lending rates across the system. Liquidity is very comfortable,” he said.
Inter-bank liquidity has eased considerably as reflected in the fall in call money rates to near 6.5-6.6 per cent compared with as high as about 22 per cent in October.
The leading private sector bank would bring down its benchmark prime lending rate in line with the fall in systemic rates, Chatterjee said without detailing a time frame.
“I think we don’t have a precise date for anything. But, overall, the systemic rates are coming down. So, we will work in line with the system,” he said.
On July 31, ICICI Bank had hiked its benchmark prime lending rate for corporate and retail customers by 75 basis points to 17.25 per cent and 14.25 per cent, respectively.
In November, many public sector banks reduced their prime lending rates by 75 bps, after Reserve Bank of India took a series of measures to improve liquidity in the banking system.
Since October, RBI has slashed Repo Rate by 250 bps, banks’ Cash Reserve Ratio by 350bps and Statutory Liquidity Ratio by 100 bps.
The latest monetary easing was on December 8 when Indian central bank cut Reverse Repo and Repo each by 100 bps to 5.0 per cent and 6.5 per cent, respectively. Indian banks now need to respond and cut rates, Chatterjee said
“It is not about RBI. I think it is about the system. I think it is in the hands of the banks,” he said.
