The Hindu Business Line : Working capital rate cuts in 0.25-6 pc band in 2003-04

THE reduction in interest rates on working capital loans by the large banks in the country varied from 0.25 per cent to six per cent for the fiscal ended March 31, 2004.

While State Bank of India (SBI) reduced interest rate on working capital loans by 0.50 per cent to a minimum of 10.25 per cent over the year ended March 2004, Union Bank of India offered the lowest rate among the PSU banks at four per cent.

Other banks that offered competitive rates include Central Bank of India (7.5 per cent) and Bank of India (8 per cent), as per latest data released by the Reserve Bank of India (RBI).

Interestingly, ICICI Bank actually increased its maximum rate on term loans from 16 per cent to 18 per cent in a year when the yield on the 10-year Government securities fell by 0.95 per cent.

SBI's minimum lending rate for working capital loans was 10.25 per cent and the highest rate was 12.25 per cent as on March 2004. This is just 0.50 per cent lower than the rates in March 2003.

These rates indicate the range at which banks contract over 60 per cent of their business.

On the term loan front, the fall was even more negligible with the lowest rate being steady at 10 per cent and the highest rate 0.35 per cent lower at 12.75 per cent.

SBI's prime lending rate was at 10.25 per cent in March 2004 from a band of 10.25-11.25 per cent in March 2003.

ICICI Bank passed on a 0.50 per cent and a 3.50 per cent reduction on the minimum and maximum working capital loans rates respectively to 6-12.50 per cent compared to 6.50-16 per cent in March 2003.

The rates on the higher side on term loans have actually nudged up alongside a fall in the minimum rates contracted.

The band for term loans was at 18-5.75 per cent as on March 2004 compared to 16-11 per cent in March 2003.

Union Bank of India has aggressively cut its rates on working capital loans by as much as six per cent on the minimum rate while the term loans were steady over the fiscal under review.

The working capital loans rate range was at 4-12.75 per cent, down from 10-14.75 per cent in March 2003.

Bank of India and Punjab National Bank (PNB) also aggressively cut rates. The minimum working capital loan rate was 8 per cent for Bank of India and 9.75 per cent for PNB.

On the term loan front too, PNB drastically slashed the minimum rate by 2.5 per cent to 10.75-12.75 per cent, down from 13.25-13.25 per cent the previous fiscal.

Bank of Baroda cut rates by 0.25 per cent on both working capital and long-term loans.