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If you are waiting for loans to get cheaper, finally the time has come.
Driven by 25 bps cut in repo rate and Cash Reserve Ratio by the Reserve Bank of India on Tuesday, banks are now gearing up to bring down lending rates.
The banking behemoth, State Bank of India, had already indicated that it would consider reducing lending rates after the rate cut by the RBI. Others are likely to follow suit.
“A cut in lending rates is now possible as the repo rate reduction is also coupled with a cut in cash reserve ratio,’’ said M. Bhagavantha Rao, Managing Director, State Bank of Hyderabad.
P. Nandakumaran, Managing Director, State Bank of Travancore, too agreed that interest rate cues indicate the possibility of transmission of the relief to consumers.
Many bankers, including Ajai Kumar, CMD of Corporation Bank, say that the decision on rate cut would be taken in a week or two by the asset-liability committees of their respective banks.
City Union Bank plans to review the situation and take a decision on the rate cut around February 10, said its Managing Director N. Kamakodi. Kolkata-based UCO Bank and United Bank of India also have similar plans.
More cuts likely
The cut in lending rates is expected to be in the range of 25 bps though some could go for an aggressive stance. This would benefit individual customers in home loan and auto loan segment.
“Even a 25 bps rate cut will be beneficial. What is more assuring is a hope that there could be further reduction in rates,’’ L. Prashant, a railway employee, said while finishing formalities for a new home loan at an Andhra Bank branch in Begumpet here.
At present, interest rates across banks are around 10.50 per cent on home loans, 11.25 per cent on car loans, 12-13.50 per cent on education loans and over 18.50 per cent for personal loans.
According to P. Bhaskara Narayana, Chief Financial Officer, Natco Pharma Ltd, any cut in interest on term debt for corporates would mean a lot. “This should have come nine months back,’’ he said.
Currently, interest on corporate loans is in the range of 12-12.5 per cent.
(With inputs from Vinson Kurian in Thiruvananthapuram, L.N. Revathy in Coimbatore and Shobha Roy in Kolkata).
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