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Banks can cut lending rates by 50 bps: PNB chief

March 20, 2009 17:25 IST

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Punjab National Bank [Get Quote] chairman K C Chakraborty today said banks in India have room to slash their lending rates by 50 basis points.

"I don't say that within the present structure there is no scope of reducing the lending rates... maybe by another 50 basis points for each bank," he said in an interview with a private news channel CNBC TV18.

Chakraborty said he is confident of maintaining the bank's net interest margin at around 3.5 per cent and expects credit growth of 20 per cent in the next financial year.

The chief of the country's second largest public-sector lender said interest rates should fall as and when inflation eases, but pointed out the need to lower deposit rates first.

"First we have to cut the interest rates on deposits and if we are not able to cut interest rates on deposits then it will be very difficult for the banks to cut interest rates on lending," he said.

While citing the small saving rate of 8 per cent as a problem, the banker stressed the need for lowering of the benchmark rate to enable banks cut interest rates on deposits and thereafter in advances.

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