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Banks cannot lower rates any more: IBA chief

March 26, 2009 19:05 IST

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Indian Banks' Association on Thursday said banks cannot lower their lending and deposit rates any further under the current scenario.

"There is no more headroom for banks to cut their prime lending rates (PLR) and deposit rates in the near future," IBA chairman T S Narayanasami said.

On the chances of rate cuts, with inflation nearing zero, by the Reserve Bank of India [Get Quote] to provide liquidity and cheaper funds to banks, the banker said these won't help.

"RBI repo cut will not have any effect as G-Sec (government securities) is firming up. Today, it (10-year treasury bond yield) crossed over 7 per cent," Narayanasami, who is also the Bank of India's chairman and managing director, said.

On lowering of cash reserve ratio (CRR), the percentage of deposits that banks are mandated to keep with the RBI, he said, "There is no need for further cut in the CRR (cash reserve ratio) as there is enough liquidity in the system."

Pointing out that the RBI would be required to raise funds for the government through the market borrowings programme, he said, "RBI needs to be more intense with OMO (open market operations)."



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