With inflation nearing zero and signs of economic revival, bankers today hinted at cutting lending rates by 0.5 per cent and deposit rates by 0.5-0.75 per cent in two-three weeks.
"Given that the inflation is low, lending rates may go down further by 0.5 per cent in the next two to three weeks and deposit rates by 0.5-0.75 per cent. Banks will bring down their interest rates in line with a reduction in cost of funds," Bank of India's Chairman and Managing Director T S Narayanasami told PTI here.
Responding to the monetary policy signals and prevailing market trends, state-owned banks have already brought down their Benchmark Prime Lending Rates (BPLR) by 0.5 per cent in the recent past, Narayanasami, who also head's Indian Banks' Association (IBA) said.
Bank of Baroda's CMD M D Mallya agreed that the current macro-economic conditions favoured further reduction in lending rates.
BOB may look at a possible reduction in its rates after watching the market movements, Mallya said.
"There surely exists a scope to bring down the rates further. Given the current macro-economic signals, such as the low inflation, deposit and lending rates are tend to drop further in the period ahead," Mallya said.
The WPI-based inflation fell to historic low after RBI aggressively cut its key-rates since October last year. Inflation currently stands at 0.31 per cent.
State-owned Central Bank of India's Executive Director Ramnath Pradeep echoed the view saying the bank will examine the possibility of reducing its lending rates as and when the cost of funds come down.
"There is certainly a scope to cut rates further by another 0.5 per cent," Pradeep said.
Kotak Mahindra Bank's Head of Retail Liabilities K V S Manian said the interest rates will come down by another 0.25-0.5 per cent if larger banks take the lead.
"Cost of funds of banks are still high and banks need to bring down their deposit rates first. This will be followed by a similar reduction in the lending rates. Larger banks will have to drop their rates first," Manian said.
Axis Bank's Head of Credit Partha Mukherjee said banks have responded to the market signals and have reduced their interest rates in the recent past.
"Banks have already lowered their lending rates. This trend is likely to continue in the period ahead if the cost of funds are decreasing in the system," Mukherjee said.
