RBI asks lenders to cut rates; SBI, ICICI, HDFC Bank oblige

Mumbai: Nudged and prodded by RBI, leading banks — SBI, ICICI and HDFC Bank — cut their lending rates by 0.15-0.25 percent despite the status quo in policy rate of the central bank, which did some tough-talking on the need for commercial lenders to bring down rates.

The action of the banks, which can bring some relief to corporate and retail borrowers including for home and auto loans, came after RBI Governor Raghuram Rajan termed as “nonsense” the lenders’ claim that cost of funds was still high.

The action can also have a snowballing effect forcing other banks to follow suit. Small lender Lakshmi Vilas Bank also announced a rate cut of 0.15 percent to 9.85 percent, similar to that of SBI and HDFC Bank, while ICICI Bank lowered its base lending rate by 0.25 percent to 9.75 percent.

The rate cuts were announced hours after a war of words erupted between Rajan and the top bankers, who had appeared reluctant to effect a cut.

After two cuts in three months, the RBI kept the repo rate, at which the central bank lends to banks, unchanged at 7.5 percent on fears of unseasonal rains impacting food prices. The cash reserve ratio, which is the amount of deposits parked with the central bank, will remain at 4 percent. Bank rate has also been retained at 8.5 percent.

Hours later, SBI took the lead in effecting the rate cut, followed soon by HDFC Bank, whose CEO Aditya Puri had also hinted earlier in the day that it would take some time for rates to be cut by the lenders.

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SourceZeenews

RBI