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Bankers were not happy with the RBI policy. They expected a cut in repo rate which didn’t come.
The 25 bps cut in CRR will not significantly impact lending rates, they feel. Further, they seemed “unpleasantly surprised” with the RBI move to impose an additional provisioning of 0.75 per cent on standard restructured assets.
K. R. Kamath, Chairman of Indian Banks’ Association, and CMD, Punjab National Bank : The 25 basis point CRR cut will give room for more credit to the productive sector and, to some extent, impact the cost of banks.
An unpleasant surprise was in the form of the additional provisioning for the restructured assets. The 0.75 percentage point hike, when translated, will hit profitability by as much as 3 per cent. While we are not in the position to earn 3 per cent of the profit through the 25 bps CRR cut, to that extent we (banks) will be in deficit.
Chanda Kochhar, MD and CEO, ICICI Bank : Over a period there will be some softening in interest rates, but with the CRR cut we do not see any immediate rate cut. Interest rate reduction moves only with a reduction in cost of funds.
The175 bps CRR cut over the year has helped banks reduce cost of funds and cut rates. However, each step may not be substantial enough to warrant an immediate change.
The market would look forward to a policy rate reduction by the RBI in the coming months.
Pratip Chaudhuri, Chairman, State Bank of India : Being an optimist, I had expected a 50 bps cut. A 25 bps CRR cut will give an additional liquidity of about Rs 2,750 crore to SBI. On our restructured book, which is at Rs 35,000 crore, a 0.75 per cent increase would require an additional Rs 300 crore which is not very significant as we had budgeted for about Rs 10,000 crore provisions.
On the rate cut, our ALCO (asset liability committee) will meet in a day or two and we will assess our optimal net interest income.
Aditya Puri, Managing Director, HDFC Bank : We are examining the pros and cons and over time the rates are likely to come down in this fiscal year.
S. L. Bansal, CMD, Oriental Bank of Commerce : The benefits arising from CRR cut will be offset by the additional provisioning requirements on restructured loans.
The 25 bps CRR cut will release Rs 400 crore for OBC and translate to earnings of about Rs 32 crore on an annual basis. But the additional provision requirement on restructured loans will compel the bank to provide Rs 82-83 crore, which will wipe out the gains from CRR cut. Net-net, there is no gain for us from the policy announcements.
M. Narendra, CMD, Indian Overseas Bank : The policy addresses persisting inflationary threats. By cutting CRR by 25 basis points, the RBI has made available Rs 17,500 crore for meeting the commercial needs during the ensuing busy season.However, banks are unlikely to tweak interest rates in the immediate future considering the mounting pressure on profitability from rising NPAs.
The review has underscored the threat from NPAs and hiked the provision for restructured standard accounts which will further squeeze profitability.
The RBI is examining the feasibility of introduction of long-term fixed interest rate retail loan products which will be welcomed by retail borrowers.
T. M. Bhasin, CMD, Indian Bank : Banks will hardly get much relief on the liquidity front as whatever fund is released by way of a CRR cut will be offset by the requirement for higher provisioning for restructured standard accounts. So it looks unlikely for banks to pass on the benefit to their customers. Though a uniform rate cut across the board might not be possible immediately, however, softening of rates might happen in certain sectors.
P. Jayarama Bhat, MD, Karnataka Bank : The CRR cut by 25 basis points was on expected lines. This cautious stand was warranted in view of the higher inflation projection in the near term and the prevailing fiscal condition.
The impact of the increased provision for restructured standard accounts will vary between banks. Those with a large share of restructured assets may see their profitability being affected more.
S. Chandrasekharan, Executive Director, UCO Bank : It might take one--two months for banks to pass on the benefit by way of a reduction in lending rates.
We have already garnered some deposits at higher rates which have to be shed at first. Once we are able to garner deposits at lower rates we will be able to pass on the benefit to customers.
(With inputs from Delhi, Chennai, Kolkata and Mangalore bureaus.)
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