Major Commercial banks, including the State Bank of India, HDFC and ICICI have announced cut in their lending rates after RBI Governor Raghuram Rajan expressed strong disappointment over non-transmission of policy rates.
India’s biggest lender, the State Bank of India (SBI) has lowered its base lending rate by 0.15 percentage point to 9.85 per cent. The new rate will be effective from the 10th of this month.
The private sector HDFC Bank also cut lending rate by 0.15 per cent to 9.85 percent effective from the 13th, while the ICICI Bank announced cutting base lending rate by 0.25 percentage point to 9.75 per cent.
After announcing the cut, SBI Chairman Arundhanti Bhattacharya said that other lenders should follow the move and lower their rates. She also hinted at lowering of deposit rates.
On the other hand, ICICI Bank’s Chanda Kochchar said it is not just the repo rate change that determines the base rate change, it depends on cost of funds, deposit mix, liquidity situation and also on credit off take.
The cut was announced despite the Chiefs of these banks had earlier yesterday said that lowering of interest rate will not be possible just as yet.
After two cuts in three months, the RBI kept the repo rate, at which the central bank lends to banks, unchanged at 7.5 per cent on fears of unseasonal rains impacting food prices.
The cash reserve ratio, which is the amount of deposits parked with the central bank, will remain at 4 per cent. Bank rate has also been retained at 8.5 per cent.