Hongkong Bank & Two Psu Banks Cut Prime Lending Rates

Union Bank of India, Central Bank of India and Hongkong Bank cut their prime lending rates (PLR) yesterday in quick response to the Reserve Banks announcement of the cut in the bank rate to 10 per cent on Wednesday.

Others are expected to follow suit as banks move collectively to bring down the interest rate in the economy.

Taking the lead as usual, Union Bank cut its prime lending rate by 50 basis points to 13.5 per cent yesterday.

Central Bank brought its prime lending rate down to 14 per cent from 14.5 per cent.

Hongkong Bank announced a massive 1.5 percentage point cut in its PLR to 14.5 per cent from 16 per cent. These banks have also simultaneously cut their deposit rates.

 

The real impact on the lending rates will be felt only after State Bank of India cuts its PLR. Says SBI chairman M S Verma, We will take a decision on the PLR cut very soon.

Meanwhile, Industrial Credit and Investment Corporation of India (ICICI) has decided to wait and watch the situation before it cuts its lending rates. ICICI chief executive K V Kamath said: I see no urgency to drop lending rates. There is no significant drop in our cost of funds in the last two days as compared with the previous month.

S. Doreswamy, chairman and managing director of Central Bank said, The cut has been possible as our cost of funds are coming down after the bank rate cut.

DDJ John, chief executive officer of Hongkong Bank, said the 1 percentage point cut in the bank rate was a clear signal by the Reserve Bank that it wanted lower interest rates at the marketplace.

The reduction in interest rates will translate into higher credit off-take which will enable the economy to exceed targeted growth rates, he hoped.

Union Bank, which has a four percentage point spread over PLR, has decided to cut interest rates by 50 basis points for all its clients. This is true of Central Bank also which has a spread of four percentage points over its prime lending rate.

Hongkong Bank has slashed its deposit rates. It cut rates for 30-50 day deposits to 6.5 per cent, for 60-89 day deposits to 7 per cent and 90-179 day deposits to 7.75 per cent respectively. The rates before the cut were 7 per cent, 8 per cent and 8.5 per cent respectively.

The rates for deposits of 180 days, one year, one-two year and two-three years were cut by one per cent to 8 per cent, 9 per cent and 10 per cent respectively.

The new rate for deposits of between three and four years was slashed by 0.75 per cent to 10.25 per cent and 0.5 per cent to 10.5 per cent for deposits of four-five years.

Other foreign banks are also contemplating a cut in their PLRs with in a weeks time. HDFC Bank will decide on the PLR cut on Monday.

Central Bank of India has also cut its deposit rates. The rate for deposits of 30-45 days have been kept at six per cent. The rate for deposits between 45 and 180 days has been cut to 7 per cent and for those between 180 days and one year to 8 per cent both rates being cut by one percentage point.

Deposits rates between one year and two years and two years to three years have been cut by 50 basis points to 9.5 per cent and 10.5 per cent respectively.

Liabilities above three year will now attract an interest rate of 11 per cent which is a cut of one percentage point.