Citi to cut PLR by 25 bps, others yet to follow suit

A week after the Reserve Bank of India (RBI) cut key policy rates, Citibank today said it will lower its prime lending rate (PLR) by 25 basis points (bps) to 14.75 per cent.

The new PLR will be effective from May 1, 2009. In a statement, Citibank said the reduction is in line with the prevailing monetary policy of the RBI, lower deposit rates and overall cost of funds.

Citi is the third bank after ICICI Bank and Bank of Rajasthan to lower lending rates. Most public sector lenders had reduced their PLR from April 1 and said they are not looking at immediate cuts at the moment, though further reduction was not ruled out.
 

SIGNS OF SOFTENING
Bank	PLR cut	New rate
ICICI Bank
Floating reference rate	50	13.25
Benchmark advance rate	50	16.25
Citibank	25	14.75
Bank of Rajasthan	50	15.00
PLR reduction in basis points, new rate in %    Source: Banks

Punjab National Bank Chairman and Managing Director KC Chakrabarty has said that there was scope to reduce rates by at least 50 basis points, while Corporation Bank Chairman and Managing Director JM Garg also expected rates to fall by up to 50 basis points.

Other players, such as HDFC Bank and IDBI Bank, have reduced deposit rates to realign their cost of funds, while State Bank of India is looking at a strategy of special lending rates for various segments.

While Citibank is the first foreign bank to respond to the latest round of policy rate cuts by RBI, the India head of a foreign bank said that rates would come down by 25-50 basis points from the next quarter.

When contacted, a spokesperson for Standard Chartered Bank said, “Our lending and deposit rates are extremely competitive. We constantly evaluate market conditions and set our rates accordingly.” The bank’s PLR is 14.25 per cent at present.

“We are still contemplating the move. The reduction in prime lending rate is constantly under review,” said a senior executive at HSBC Bank.

On April 21, RBI had announced a 25 bps cut in the repo rate, or the rate at which it lends to banks, as well as a 25 bps cut in the reverse repo rate, or the rate at which it mops up liquidity.

Citibank had last revised its PLR in November, when the rate was lowered 50 basis points. Foreign and private sector banks have been under pressure to reduce interest rates with RBI also saying that there was scope for reduction in the wake of the measures announced so far.