Small and mid-sized private banks are not in a hurry to pare their lending rates even as HDFC Bank, the second-largest private sector lender in the country, has decided to reduce its Base Rate or minimum lending rate from today.
While most bankers agree that lending rate cuts are imminent in the near-term, they prefer to wait for signals from the Reserve Bank of India (RBI) on the direction of interest rates. Small private banks will also watch the actions of their bigger rivals like State Bank of India (SBI) and ICICI Bank before revising their own lending rates.
"We have no plans to reduce our Base Rate as of now. Deposit rates continue to remain high and unless there is a cut in policy rate we do not intend to slash our lending rates," PG Jayakumar, chief executive officer of Dhanlaxmi Bank, told Business Standard.
RBI's third quarter review of monetary policy is scheduled on January 29, 2013 and the banking regulator is expected to cut the repo rate for the first time in nine months as inflationary pressures are seen easing.
Most market participants expect the central bank to pare repo rate by at least 25 basis points.
HDFC Bank became the only bank to cut Base Rate in recent weeks as it lowered its rate by 10 basis points to 9.70%.
Top executives of most private banks, however, said they will prefer to wait and watch and keep status quo on their lending rates in next few weeks.
"The ALCO [asset liability committee] will meet in the first week of January to review our rates. But it is unlikely that there will be any revision in our lending rates before RBI's monetary policy. We have not reduced our fixed deposit rates in the recent past and will need to cut those rates before revising our Base Rate. We will also keep a watch on the actions of other banks that are relevant to us and act accordingly," a senior executive of YES Bank said.
| PRIVATE BANKS BASE RATE | |
| ICICI Bank | 9.75% |
| HDFC Bank | 9.70% |
| Axis Bank | 10.00% |
| IndusInd Bank | 10.75% |
| YES Bank | 10.50% |
| Federal Bank | 10.45% |
| Dhanlaxmi Bank | 11.25% |
| Karur Vysya Bank | 11.00% |
| City Union Bank | 10.75% |
| Source: Banks | |
Similar views were echoed by top officials and chief executives of other mid-sized and small private banks.
"We had cut our Base Rate [in November, 2012]. There is nothing on the cards as of now. But I will not rule out a rate cut by the end of January since we are heading towards a soft interest rate regime," K Venkataraman, chief executive officer of Karur Vysya Bank, said.
Thrissur-based Federal Bank is yet to take a decision on lending rate revision. "We will watch the market. Currently, we are evaluating the situation and have not decided on a rate cut," Shyam Srinivasan, chief executive of Federal Bank, said.
City Union Bank's chief executive N Kamakodi said the private lender will only cut rates if RBI decides to reduce repo rate in its next policy meeting. "If public sector banks like State Bank of India and Indian Overseas Bank, that have large presence in the regions where we operate, cut their rates we may decide to reduce our lending rates," he added.
