People who are looking forward to purchase a car or home there is good news for them as public sector banks will be further cutting the lending rates in these two segments. During December public sector are planning for the second round of cut in the benchmark lending rates by up to 50 basis points.
Some of the banks have already started reducing the deposit rates as more liquidity has been instilled by the Reserve Bank. Thus, according to a senior banker the scope for cutting lending rates has increased and this will spur demand.
Banks have started assessing asset liability situation in the light of the cuts in deposit rate coming into effect from next week, he said.
Another senior banker informed that in December further cut in Benchmark Prime Lending Rate (BPLR) in between 25-50 basis points by various banks is possible.
Earlier several public sector banks had reduced their BPLR by 75 basis points on the request made by the Finance Minister P Chidambaram earlier in the month.
Chidambaram had added that cut in the lending rates by the state-owned banks will also increase competitive pressure on their private sector counterparts which in turn will also announce similar cuts.
"Competition from public sector banks will force private sector banks to reduce their lending rates sooner than later. It will happen sooner than later," Chidambaram had said.
As usual Punjab National Bank, country's second largest lender has taken lead in reducing BPLR and has decided to reduce by 100 basis points to 12.5 per cent, which will automatically reduce PLR-linked loans by the same margin.
PNB spokesperson said the new BPLR will be applicable to all existing and new accounts. The authorities have taken decision to reduce rate "in response to monetary measures taken by RBI in November such as reduction of repo rate from 8 to 7.5 per cent, CRR (Cash Reserve Ratio) from 6 to 5.5 per cent and SLR (Statutory Liquidity Ratio) from 25 to 24 per cent."
Previously Punjab National Bank had cut its lending rates in the first week of November. The rates were then revised downward by 50 basis points to 13.5 per cent.
At present most of the banks have BPLR around 13 per cent.
PSU banks reducing interest rates is the result of number of steps taken by the RBI to introduced into the banking system Rs 2,70,000 crore since October and cuts in the short-term (repo) rates, signaling soft interest rate regime.
