United Bank Of India To Cut Short-Term Lending Rates Soon

United Bank of India (UBI) will reduce its short term prime lending rates following the move by State Bank of India (SBI) to reduce its rates by half a percentage point.

Speaking to the media for the first time since assuming office, the new chairman and managing director of UBI, S Madhukar said, "We will definitely go for a rate cut in both our deposits and advances in the short term." However, the bank is yet to decide on the extent of the cut.

UBI has taken up an aggressive strategy to increase its profitability and cut its net NPA level by almost 50 per cent. "We will have to reduce our lending rates to attract customers in this highly competitive market", explained Madhukar.

 

UBI has identified the rural sector as a thrust area. The bank will have to go in for comparable rates to compete with others in the sector to maintain earnings at the desired level.

In contrast, another city-based bank, UCO Bank, said it was yet to take a decision on rates. The chairman and managing director of UCO bank, V P Shetty, said, "we are yet to take a decision on the short term prime lending rates, but as of now there has been no changes. We will weigh the market conditions and if the need be will we reduce our rates. The decision regarding a rate cut if any will be taken by our Asset Liability Management Committee that is scheduled to meet shortly."

Shetty also said that the bank had to match its rates following the Reserve Bank's cut in PLR rates in June this year. The PLR at the bank is 12 per cent at present.

Nevertheless, industry watchers said that low credit offtake in spite of two successive reduction in rates and SBI's rate cut will force UCO to cut its rate to SBI's short term existing rate of 10 per cent for 180 days, and 10.5 per cent for 180 to 364 days.