Loans to get cheaper; SBI, HDFC Bank and Federal Bank cut lending rates

While SBI has cut its lending rate by a marginal 0.05% (5 basis points), HDFC Bank and Federal Bank announced reduction in a few segments like auto loans to the tune of 0.25%-0.50%

Mumbai: Auto, home and corporate loans will become cheaper with banks, led by market leader State Bank of India (SBI), lowering the lending rates by up to 0.50% in response to the easy money policy of the Reserve Bank of India (RBI), reports PTI.


While SBI has reduced the lending rate by a marginal 0.05% (5 basis points), private sector HDFC Bank and Federal Bank announced reduction in a few segments like auto loans to the tune of 0.25%-0.50%.


Public sector IDBI Bank and Royal Bank of Scotland (RBS) had reduced lending rates by 0.25% and 0.75% respectively on Tuesday.


The lowering of the interest rates follows the decision of the RBI to cut key benchmark lending (repo) rate by 0.25% and deciding to inject additional liquidity of Rs18,000 crore by a similar cut in cash reserve ratio (CRR).


With the reduction, SBI's base rate or the minimum lending rate will now go down to 9.70% from 9.75% effective 4th February.


"Through this reduction, we are passing on a little more than what we gain through the rate cut by the RBI," a senior SBI official said after a meeting of the asset liability committee (ALCO) of the bank.


HDFC Bank has lowered interest rate on car and two-wheeler loans by 0.25% and 0.5% respectively.


On commercial vehicles, the interest rates would be reduced by 0.25%, an official said adding that the new rates would be effective from 1st February.


Mumbai-based HDFC Bank currently offers car loans between 10.75% and 11.75%. Post rate cut, the range would be 10.5%-11.5% for repayment period between 36 and 60 months.


Accordingly, interest rate on two-wheeler loans would be adjusted to between 19.25% to 22.25%.


With regard to commercial vehicles, the rate on heavy commercial vehicle will be down by 0.25% to 11% while rate for light commercial vehicle will get reduced to 13.75% from existing 14%.


The auto loan portfolio of the bank currently stands at about Rs33,000 crore. The auto loan advances of the bank have been witnessing a growth of 12%.


IDBI Bank has already lowered its base rate by 0.25% to 10.25% effective 1st February.


SBI, which has the most aggressive offering among the domestic banks, had last cut its base rate by 0.25% last September following the two CRR cuts by RBI earlier.


The largest bank, has however, not cut its deposits rates as the bank’s asset liability committee felt its offering is among the lowest in the market at present, the official said.


"We are gaining around Rs275 crore and passing around Rs350 crore...this will have a very negligible impact on our margins," the SBI official said, adding the outstanding loans under the old benchmark prime lending rate will also go down by a similar 0.05%.


A majority of bankers said they would transmit the benefits of the RBI rate cut.


Last month, HDFC Bank had reduced its base rate by 0.1% to 9.7%, the lowest in the market.


At the same time, the benchmark prime lending rate (BPLR) of the bank was also slashed by a similar margin to 18.20%.


IDBI Bank cuts lending, deposit rates by 0.25%

IDBI Bank has reduced the benchmark prime lending rate and fixed deposit rates on select maturities by 0.25%


New Delhi: Within hours of the Reserve Bank of India (RBI) reducing the key policy rates, IDBI Bank slashed its lending and deposit rate by 0.25%, reports PTI.


“The new base rate or minimum lending rate (at 10.25%) will be effective from 1st February,” the bank said in a release.


The base rate is the minimum lending rate below which banks cannot offer any loan to customers.


IDBI Bank was the first one to cut lending rates following the announcement of the RBI to reduce short-term lending rate by 0.25% and deciding to slash cash reserve bank (CRR) by same margin to inject Rs18,000 crore of liquidity into the system.


Mumbai-based IDBI Bank has reduced the benchmark prime lending rate (BPLR) and fixed deposit rates on select maturities by 0.25%.


“IDBI Bank has taken this proactive step keeping in view the policy measures announced by the RBI in its third quarter review of monetary policy today,” it said.


The reduction in interest rate is expected to positively impact loan growth both in retail and corporate segments.


Various other banks, including the market leader State Bank of India (SBI), said that they would take a call on reducing interest rates in coming days.


National Housing Bank (NHB) had earlier announced cut in lending rates by 0.25% benefiting the home loan borrowers.


Meanwhile, foreign lender the Royal Bank of Scotland (RBS) also reduced its base rate by 0.75% to 9%.


The base rate is the benchmark to which all loan rates are linked, RBS said in a statement.


“Today's move by the RBI to cut repo and CRR by 25 basis points is in sync with our expectations. In line with the potential deflationary environment, RBS has decided to cut its base lending rate,” it said.


Home, auto loan rates could see moderation: Bankers

Both lending and deposit rates are expected to see a downward revision following the RBI’s decision to cut CRR and repo rate by 25 bps each


Mumbai: Borrowers could see better days ahead as banks are expected to cut lending rates following the Reserve Bank of India’s (RBI) decision to cut short-term lending rate as well as unlocking Rs18,000 crore by slashing cash reserve ratio (CRR) by 0.25%, reports PTI.


Soon after the Reserve Bank unveiled its mid-quarter review of the monetary policy, several bankers hinted that they may consider rate cut in their Asset Liability Committee (ALCO) meeting.


RBI governor D Subbarao in the third quarter monetary policy review surprised the market by cutting short-term lending rate called repo by 0.25% to 7.75% and CRR by similar margin to 4%, releasing Rs18,000 crore primary liquidity into the system.


Commenting on RBI’s action, SBI managing director A Krishna Kumar said “a rate cut is likely. Rates on advances and deposits could come down simultaneously. The RBI’s action is positive”.


Indian Overseas Bank executive director AK Bansal said the RBI’s action will result in moderation of interest rates in the coming days. Both lending and deposit rates are expected to see a downward revision which will improve growth prospects, he said.


According to Canara Bank executive director AK Gupta, the bank would consider interest rate cut in the light of the RBI policy action.


Echoing similar views, Bank of India executive director N Seshadri said most of the banks are likely to transfer the rate cut. “Full transmission will happen on both lending and deposit rates. A 0.25% cut is most likely.”


Tushar Poddar, managing director and chief India economist, Goldman Sachs, said, “While the RBI’s action was ahead of market expectations, we were expecting it to ease more on repo rather than CRR. A front-loaded cut on the repo would have helped lower interest rates in the economy faster, in our view, and was justified by the downside surprises to inflation. The central bank, however, has taken the view that easing liquidity by cutting CRR will be of greater help in monetary transmission, and ease the growth process.”


Kotak Mahindra Bank chief economist Indranil Pan said RBI delivered a very balanced policy. “As expected, they chose the calibrated path of a 25 basis points cut in the repo and the reverse repo rates. They wanted to avoid a repeat of April 2012 when the RBI had cut the repo rate by 50 basis points and then had to pause with surprises creeping in from the inflation side,” he said.


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