Mumbai:
Banks are expected to drop lending and deposit rates
in response to the cut in bank rate from 6.25 per cent
to 6 per cent. Unlike last time, when the Reserve Bank
of India (RBI) cut the bank rate in October 2002, banks
are now more inclined to follow RBI's signal.
If indications
from leading banks such as State Bank of India (SBI),
Bank of Baroda (BoB) and Corporation Bank are anything
to go by, most banks will be resorting to a cut in prime-lending
rates and deposit rates shortly.
SBI chairman A
K Purwar says his bank's asset liability committee will
be meeting shortly to take a decision. "The RBI's
policy measures will put a lot of pressure on banks to
reduce transaction costs and improve productivity. This
will be the new challenge for the banks."
BoB chairman and
managing director P S Shenoy says his bank will take a
decision in a couple of days. "The industry should
be responding to the RBI's signal and BoB will not be
out of it."
Says Corporation
Bank chairman K Cherian Varghese: "Reduction in the
bank rate and CRR [cash reserve ratio] by 25 basis points
is an indication towards a softer interest rate regime,
enabling availability of credit at lower interest rates.
The bank's asset liability committee will meet to fine-tune
deposit and lending rates."
Dalbir
Singh, chairman, Central Bank of India, and chairman,
Indian Banks' Association, however, feels a reduction
in the bank rate need not result in a corresponding cut
in rates by all banks immediately. "It is for each
bank to decide depending on their cost of funds. On the
whole the monetary policy is a prescription for taking
a step forward towards integrating Indian banking with
global financial markets."
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