Small and mid-size private banks are not in a hurry to pare their lending rates, even as HDFC Bank, the second largest private sector lender, said it was reducing its minimum lending rate, the Base Rate (BR).
While most bankers agree lending rate cuts are imminent, they prefer to wait for a signal from the Reserve Bank of India (RBI) on the direction. Small private banks will also watch the action of bigger rivals such as State Bank of India (SBI) and ICICI Bank before any revising.
“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 (RBI’s) policy rate, we do not intend to slash our lending rates,” P G Jayakumar, chief executive officer of Dhanlaxmi Bank, told Business Standard.
| BASE RATE Private banks’ figures (in %) | |
| Dhanlaxmi Bank | 11.25 |
| Karur Vysya Bank | 11.00 |
| IndusInd Bank | 10.75 |
| City Union Bank | 10.75 |
| YES Bank | 10.50 |
| Federal Bank | 10.45 |
| Axis Bank | 10.00 |
| ICICI Bank | 9.75 |
| HDFC Bank | 9.70 |
| Source: Banks | |
RBI’s third quarter review of monetary policy is scheduled on January 29, 2013. It is expected to cut the repo rate for the first time in nine months, since inflationary pressures are seen as easing. Most market participants expect the central bank to pare the repo rate by at least 25 basis points.
HDFC has became the only bank to cut BR in recent weeks. It lowered this by 10 bps, to 9.7 per cent. Top executives of most private banks say they’ll keep their lending rates unchanged for at least some 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 BR. We will also keep a watch on the actions of other banks relevant to us and act accordingly,” said a senior executive of YES Bank.
Similar views came from top officials and chief executives of other mid-sized and small private banks. “We had cut our BR (in November). 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,” said K Venkataraman, chief executive officer of Karur Vysya Bank.
“We will watch the market. We are evaluating the situation and have not decided on a rate cut,” said Shyam Srinivasan, chief executive of Federal Bank.
City Union Bank’s chief executive, N Kamakodi, said it would only cut rates if RBI decided to reduce the repo rate. “If public sector banks like SBI 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.
