Amidst ongoing rate cuts, bankers on Tuesday said they expect a further fall in interest rates due to ample liquidity in the banking system. "With ample liquidity in the banking system, pressure on rates have eased," Canara Bank CMD M B N Rao said, adding that with the revision of benchmark primary lending rate (BPLR), the interest rates for home and car loans, besides loans for small and medium sector and consumer goods would come down.
Talking to reporters on the sidelines of a meeting that public sector bankers had with Finance Minister P Chidambaram, Rao said the banking industry was faced with a peculiar situation - high growth in deposit rates and fall in credit growth. On a year-on-year basis, deposits grew by 29.5 per cent this fiscal till January 25, against 23.5 per cent last year. At the same, advances witnessed a growth of 22.6 per cent as compared to 29.8 per cent in the same period, said Rao, who is also the Chairman of Indian Banks' Association.
IDBI Chairman and Managing Director Yogesh Aggarwal also said, "Asset Liability Committee of the bank is meeting next week to deliberate on rate cut, as we have to keep interest rate in line with the market."
If the trend continues, naturally there is case for reduction in the interest rate subject to RBI monetary policy guideline, Rao added. He also said, there is about Rs 2,33,000 crore (Rs 2.33 trillion) liquidity in the system. Owing to liquidity, he said investments in securities have gone up to 30 per cent against 6.8 per cent last year.
Along with State Bank of India, Canara Bank on Monday announced a reduction in benchmark prime lending rates by 25 basis points effective from February 16. Besides, Bank of India and Bank of Maharashtra also effected a 0.25-2.5 per cent cut in lending rates in different segments. Earlier, Kolkata-based Allahabad Bank had slashed interest rates on home loan, car loan and education loan by up to one per cent.
