Bank of Baroda on Monday cut its interest rates for loans upto Rs 50,000 for agriculture, SSI and other priority sectors.
Finance Minister Pranab Mukherjee will meet chiefs of public sector banks here on Saturday, at a time when industrial growth has decelerated to a 13-month low of 7.1 per cent and interest rates have moved northward.
With a balance sheet size of Rs 22,000 crore (Rs 220 billion), we are a meaningful player in our home country, says Rana Kapoor.
The rupee export credit interest rate scheme, under which exporters get loan at 250 basis points lower than the prime lending rate, has been extended till April 30, 2009. It was to expire by this month-end.
Home, auto and other retail loans from SBI and Union Bank of India will cost more, with the two public sector banks on Thursday announcing an identical 0.5 hike in their benchmark prime lending rates to protect margins.
Deposit rates stood at 8-9.50 per cent, compared to 6.25-8 per cent as on August 18, 2006, the report for the month of August stated.
Continuing the flow of home loans and accessing low-cost deposits are two key elements of the government's instructions to public sector banks.
Central Bank of India on Wednesday cut the benchmark prime lending rate by 0.5 per cent to 11 per cent and slashed the interest rate for agri and SSI loans, while offering higher returns on savings of senior citizens.
All public sector banks have moved to such a regime voluntarily, while private banks are yet to. The state-run banks have introduced repo-linked products for floating-rate home and auto loans, but the RBI said loans to micro, small and medium enterprises (MSMEs) should also be linked to an external benchmark.
The country's largest lender, the State Bank of India on Wednesday said it will raise car and other personal loan rates, excluding housing and education, by an average of 0.75 per cent.
Home loan major HDFC Ltd has raised its prime lending rate by 0.75 per cent to 13.5 per cent in a bid to manage its rising cost of funds.
HDFC has joined the interest rate war on housing loans by slashing both variable and fixed rates by 0.5 to 0.75 per cent for individual loans with effect from February 5.\n\n
With the revised interest rates, the one-year fixed deposit will attract an interest rate of 6.75 per cent as against the 7 per cent earlier
The Reserve Bank of India has convened a meeting of bank chairmen and managing directors on September 16 to discuss ways to formulate the benchmark prime lending rate, which is expected to be introduced by this month-end.
In a double-dose bid to boost growth and employment prospects, the Union Cabinet on Tuesday approved a Rs 2.07 trillion outlay for a research development and innovation (RDI) Scheme to fund private sector innovations, and an employment-linked incentive (ELI) to create over 35 million new jobs over the next two years.
The working group, which reviewed the system of lending rates, said in a report on Wednesday that the Base Rate could serve as the benchmark for floating rate loans.
The Institute of Economic Growth also expected banks prime lending rates to decline to below 11 per cent in next few months which would further spur industry growth.
The Indian banking sector has overcome concerns pertaining to the rising cost of funds and an increase in provisioning requirements under the new RBI norms, to post a healthy rise in net interest income during the quarter ended March 2007.
SBI fixed its base rate, the minimum lending rate, at 7.5 per cent which would replace its benchmark prime lending rate from Thursday.
SBI announced a 0.40 per cent cut in lending rate to 9.30 per cent, which is the most competitive in the market at present.
The RBI, which has no interest or mechanism to get feedback from bank customers, is unaware of this. If made aware, it remains silent, proving that it has no problem in allowing lenders to short-change its customers, says Debashis Basu.
The government and Reserve Bank of India are considering a series of measures to enhance credit flow to the\n\nsmall scale industry at prime lending rates and on collateral security.
The move, proposed through a draft circular, seeks to introduce greater transparency in pricing credit.
In a mixed bag for HDFC Bank ahead of the parent HDFC's merger with itself, the Reserve Bank of India has declined to make exceptions on certain aspects, and has offered some leeway on others. The country's largest private sector lender, which is aiming to conclude the merger with the home finance major by July, had written to the central bank seeking certain forbearances after announcing the $40-billion merger in April last year. In an exchange filing this evening, HDFC Bank said it received a response from RBI on Thursday and also said that there are a few pending issues.
The final guidelines to link the interest rate to external benchmarks will be issued by the end of this month
Senior bankers are trying to impress upon the central bank that the shift to external benchmark-linked lending be postponed to April 1, 2020.
A number of non-banking financial companies (NBFCs) have tapped into the debt capital market ahead of the festival season to meet increasing credit demand as bank funding slows. On Tuesday, Aptus Value Housing Finance secured Rs 300 crore at an interest rate of 8.75 per cent through bonds maturing in five years. ICICI Home Finance Company turned to the market to raise Rs 275 crore at 7.94 per cent, alongside another Rs 300 crore at 7.95 per cent, through bonds maturing in five and three years, respectively.
For banks to cut loan rates, the cost of deposits needs to come down, and there is no sign of that happening.
The central bank, which usually refrains from asking banks to change rates, added: "Banks should do a careful review of their lending rates based on change in the inflation outlook, the domestic liquidity conditions and their cost of funds." While expecting a high demand for credit in the domestic market due to depleting overseas funding and equity markets drying up, RBI said banks have to ensure adequate credit flow to agriculture and small and medium enterprises).
Overseas fundraising by Indian firms is experiencing a robust revival in 2024, following a lacklustre 2023. This resurgence is primarily driven by strong demand for high-yield bonds from international investors amid improving liquidity conditions and reduced hedging costs. Indian companies raised ~32,619 crore through overseas bonds in the first half of 2024, surpassing the total amount raised via such instruments in the entire 2023, which stood at ~31,218 crore, according to PRIME Database. In comparison, ~45,237 crore was raised in 2022 and ~1.05 trillion was secured in 2021.
The Reserve Bank of India has cut the repo rate (at which it lends to the banks) by 525 basis points to 4.75 per cent from the pre-credit crunch level. Yet, companies continue to borrow much of their working capital at 12.25 per cent, which is State Bank of India's prime lending rate and a sort of benchmark. Nearly three-fourths of all working capital loans like cash credit and overdraft are lent at bank's prevailing PLR.
A bit of good news is that it has already mopped up $19 billion in forwards in May.
The Mumbai-based public sector bank had declared on March 26 about its intention to cut PLR by 50 bps, from 13.25 per cent to 12.75 per cent from April 1. The revised date for implementing revision in key lending rate would be decided later, Agarwal said, adding the bank would monitor the market trend and the steps that the government took to arrest the spiralling prices.
The Reserve Bank working group, constituted to revisit benchmark prime lending rate (BPLR), is likely to recommend two types of PLRs and may put a ceiling on banks' sub-PLR lending, a source said.
When evaluating bonds, returns shouldn't be the sole factor. Pay close attention to the bond's credit rating. It should ideally be AA or higher.
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