PNB cuts rates, others hold on

Within hours of the Reserve Bank of India’s (RBI’s) latest reduction in the cash reserve ratio (CRR), Punjab National Bank (PNB), the country’s third-largest lender, decided to lower lending rates for home, auto and education loans.

While new auto loans will be 50 basis points cheaper, lending rates on new and existing auto and home loans will also fall by the same margin. PNB Executive Director JM Garg said no decision on corporate loans had been taken yet.

Punjab & Sind Bank is to take a call on revising rates tomorrow while other banks have decided to adopt a wait-and-watch strategy.

This is the third time the central bank has cut the CRR in the last two weeks and brings the combined cut to 2.5 percentage points. With this, the CRR will be 6.5 per cent.

Bankers said lenders such as PNB and State Bank of India, which had raised interest rates by 100 basis points three months ago, might look at a reduction now.

Others like HDFC Bank and Standard Chartered Bank said they would not lower rates. An ICICI Bank source said the lender would decide only after assessing the cost of funds.

“The steep rise in cost of resources was not passed on the customers and it will be status quo now, perhaps indicating that customers may not get the benefit of any drop in the borrowing costs,” said HDFC Vice-Chairman & Managing Director Keki Mistry.

Standard Chartered Bank’s CEO for India and South Asia, Neeraj Swaroop, said: “We have been lending, and we will continue to lend. But lending will be lot easier for us with these cuts. It is too early to say if this CRR cut will lead to any cut in our lending rates.”

Bank of Baroda Chairman and Managing Director MD Mallya said the bank would watch the situation for a while before deciding the course of action. His counterpart at Uco Bank, SC Goyal, added the Kolkata-headquartered bank was not planning an immediate rate cut.

“We are not in a hurry as there are larger issues to be handled at this point. We are going slow on retail lending and had avoided a steep rise in rates earlier,” said Allahabad Bank Chairman & Managing Director KR Kamath.