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Chennai, Oct. 21 The Reserve Bank of India has sent out the right signals with the 100 basis point report rate cut, according to Mr M.V. Nair, Chairman and Managing Director, Union Bank of India. He said although the quamtum of cut was higher than expected, this will bring down interest rate of deposits and advances.

He said that Union Bank of India will cut rates on deposits and advances but was uncertain when. “The normal SLR holding is 25 per cent. We hold about 27 per cent to give us a headroom of two per cent,” said Mr Nair.

Mr Romesh Sobti, Managing Director and CEO, IndusInd Bank, said that the CRR cut was a signal of liquidity and repo rate cut is a sign that shows cost of liquidity.

“It is clear from the repo rate cut that there would be a downward revision both on the advances and deposits. I think yield on bonds are expected to soften and the value of older Government securities will appreciate on mark to market gains,” said Mr Sobti.

Mr S.K. Goel, Chairman and Managing Director, UCO Bank, said that the repo cut is a positive step as the interest rate on deposits and advances would fall.

“We will certainly cut interest rate on deposits and advances by one per cent, but the final decision will be taken after the credit policy announcement by the RBI Governor on October 24,” he added.

Mr Narayana Moorthy, Managing Director and CEO, Tamil Nadu Mercantile Bank, said this was an anticipated move from the RBIAccording to Mr T.M. Bhasin, officiating Chairman of United Bank of India, the repo rate cut would reduce the cost of borrowings of banks from the RBI through the repo window, therefore enabling banks to lend at lower rates to their customers. The pass-on effect of the repo rate cut might, however, take some time. “The effect of the cut in repo rate will be visible after one or two fortnights. The reduction in lending rates has to be coupled with a decrease in interest rates on deposits, but this will not be possible so long as the inflation remains high,” he said.

On the availability of SLR securities required to pledge with the RBI for repo auctions, he said, “Banks usually have enough SLR securities at their disposal. Moreover, the central bank had recently announced relaxation in SLR by 1.5 per cent making more of such securities available for pledging.”

Mr V.K. Dhingra, Executive Director, UCO Bank, said, “It is a very positive signal and a big support for bankers. We have already procured high cost deposits so it will not be possible for us to immediately reduce interest rates on advances.”

More Stories on : CRR & Bank Rates | Interest Rates

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