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N.S.Vageesh

Chennai, Nov. 4 Corporates and retail borrowers are likely to get some relief from banks very shortly.

Under some veiled guidance from the Finance Minister, banks are planning to cut rates by as much as 0.75 percentage points. Till two days ago, banks maintained that they would ‘review’ their rates next month — shorthand for saying that they won’t cut rates immediately. Some remained resolute about not cutting lending rates until deposit rates came down first.

What happened inside the Finance Minister’s conference with public sector bank chiefs today is anybody’s guess. It is the kind of scene that you might have seen in films. The main actors enter the closed room, ready to fight. The audience waits with nail-biting suspense outside the closed doors — expecting a clash royal. And then the anti-climax — as both the protagonist and the antagonist emerge arm-in–arm, professing eternal friendship and peaceful coexistence.

Something on those lines may have happened. For, when they came out, the Finance Minister claimed that he did not direct banks to cut rates. He just impressed on them to deliver loans at a price at which it would ‘flow’. And the bank chiefs also obligingly played along, chanting in unison that they were cutting rates of their own accord. And that they would all cut rates by almost 0.75 percentage points.

Never mind even if lowering deposit rates has to wait a bit longer. And never mind even if credit is growing at the kind of pace seen during the past four years of boom. If demand is so high, why make the credit any cheaper? That’s a question no bank chief wants to answer.

More Stories on : Credit Market | Interest Rates

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