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A week after some major commercial banks cut their base rates (BRs), most public sector lenders are yet to pay heed to the Reserve Bank’s prodding to cut lending rates.
The BR is a benchmark used by banks to price loans.
Top public sector bank (PSB) executives said banks having issues with their balance sheet profile (meaning, a highly stressed asset book and a large wholesale deposits’ portfolio), and also those without fulltime chief executives, remain undecided.
Punjab National Bank, Bank of Baroda and Canara Bank are major PSBs without fulltime chiefs.
A senior Bank of India executive said they were in the midst of portfolio analysis to assess the impact of a possible rate cut. The exercise should be over in a week to 10 days, after which bank would decide on rate revision for both lending and deposits.
A senior manager with Indian Overseas Bank said they’d completed a similar review and it was possible to reduce their BR up to 10 basis points. The final decision would be taken by the asset/liability committee.
On April 7, State Bank of India (SBI), Axis Bank, ICICI Bank and HDFC Bank announced a BR reduction, soon after RBI announced its monetary policy review for 2015-16. They did so after a public rap from RBI Governor Raghuram Rajan for the delay. Except for SBI, other PSBs are yet to decide.
After RBI cut the repo rate twice since January, PSBs had argued they were yet to see significant gain from deposit rate cuts to think of passing on the benefit to customers. Also, as the March quarter was the final one for 2014-15, most were loath to take such a decision, due to the immediate hit on interest income.
Two housing finance companies, DHFL and Indiabulls Housing Finance, have reduced interest rates on loans. DHFL cut the rate by 25 basis points (bps), while Indiabulls Housing Finance reduced it by 20 bps. After the cut, both rates stand at 9.9 per cent.
