PNB to cut rates after cut in CRR, others yet to think

After the cut in cash reserve ratio (CRR) by the Reserve Bank of India (RBI), Punjab National Bank (PNB), the country’s third-largest lender, is planning to cut down the lending rates for home, auto and education loans.

After the reduction the new auto loans will be 50 basis points cheaper, moreover lending rates on new and existing auto and home loans will also fall by the same margin. PNB Executive Director JM Garg informed at present no decision on corporate loans has been taken.

Punjab & Sind Bank is to take up the matter on revising rates tomorrow while other banks are adopting a wait-and-watch strategy.

The central bank has cut the CRR for the third time in the last two weeks and brings the combined cut to 2.5 percentage points. After this, the CRR will be 6.5 per cent.

Bankers pointed out lenders such as PNB and State Bank of India, which had raised interest rates by 100 basis points three months ago, might go for reduction now.

On the other hand private lenders like HDFC Bank and Standard Chartered Bank said they will not lower rates. An ICICI Bank source said the lender will decide only after assessing the cost of funds.

“The steep rise in cost of resources was not passed on the customers and it will be status quo now, perhaps indicating that customers may not get the benefit of any drop in the borrowing costs,” said HDFC Vice-Chairman & Managing Director Keki Mistry.

Standard Chartered Bank’s CEO for India and South Asia, Neeraj Swaroop, said: “We have been lending, and we will continue to lend. But lending will be lot easier for us with these cuts. It is too early to say if this CRR cut will lead to any cut in our lending rates.”

While Bank of Baroda Chairman and Managing Director MD Mallya said the bank will first watch the situation before deciding the course of action. His counterpart at UCO Bank, SC Goyal, said the Kolkata-headquartered bank is not planning an immediate rate cut, yet.

“We are not in a hurry as there are larger issues to be handled at this point. We are going slow on retail lending and had avoided a steep rise in rates earlier,” said Allahabad Bank Chairman & Managing Director KR Kamath.