Punjab National Bank will reduce interest rates to PLR/PTLR on advances in respect of agriculture and small scale industry borrowings in the category of above Rs 0.2 million but up to Rs 2.50 million.
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.
Bankers are worried the new model will affect their business of giving short-term loans to corporate clients at cheaper rates (sub-PLR loans) as lending rates on such loans will go up at least by 2 per cent in the base rate system.
Banks may reduce interest rates in keeping with the RBI's rate cuts, but they are unlikely to lend more till corporate balance sheets start looking healthier.
Under the earlier scheme, borrowers were charged fixed interest rate of 8.5 per cent for Year 2 and Year 3 for loan amount less than Rs 50 lakh (Rs 5 million) and a rate of 9 per cent for first three years for loan amount of greater than Rs 50 lakh. Year 4 onward the interest rate was fixed at PLR minus 2.75 basis points.
Under the earlier scheme, borrowers were charged fixed interest rate of 8.5 per cent for Year 2 and Year 3 for loan amount less than Rs 50 lakh (Rs 5 million) and a rate of 9 per cent for first three years for loan amount of greater than Rs 50 lakh. Year 4 onward the interest rate was fixed at PLR minus 2.75 basis points.
Loans at a discount to the benchmark prime lending rates of banks are back with a majority of the fresh loans being disbursed at sub-PLR rates.
Indian Banks' Association on Thursday said banks cannot lower their lending and deposit rates any further under the current scenario.
Public sector lenders led by State Bank of India said on Monday that they will look at further interest rate cuts.SBI chairman O P Bhatt told reporters after a meeting with Finance Minister Pranab Mukherjee that the bank is considering cutting its prime lending rate for the second time in as many months.
On the extent of cut in lending rates, the SBI chief said 'it is difficult to say at this point of time' but indicated that it would not be less than 25 basis points. SBI earlier reduced the benchmark PLR by 75 basis points to 12.25 per cent with effect from January 1. Bhatt is in the capital to attend a meeting of state-owned bankers called by external affairs minister Pranab Mukherjee, who is also holding the finance portfolio.
Several PSU lenders, including Canara Bank, Bank of India and Bank of Baroda, Syndicate Bank, have already slashed their benchmark prime lending rates by 0.75 per cent after Finance Minister P Chidambaram met state-owned banks' heads to discuss the possibility of rate cuts.
"We are still examining the market condition and will take a view on home loan rates in another week or 10 days," SBI Chairman O P Bhatt told reporters. SBI had increased its PLR by 50 basis points to 12.75 per cent last week. Following the hike in lending rates, the bank also increased deposits rates for various maturities.
The bank will give 3.25 per cent interest on savings bank deposits with a balance exceeding Rs 100,000. At present, the interest rate is 3.5 per cent.
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.
Union Bank of India on Thursday slashed its benchmark prime lending rate (BPLR) by 0.50 per cent to 12 per cent per annum, a day after RBI cut key rate by similar percentage points.
Punjab National Bank (PNB), the country's third largest lender, followed its peers to lower its benchmark rate, giving in to the government's wish that rates needed to fall to boost consumer lending.
Country's largest lender State Bank of India on Monday slashed prime lending rate by 0.25 per cent to 12.50 per cent, a decision that will make housing and car loans cheaper.
In an effort to boost agri sector, the Tamil Nadu Agricultural University in Coimbatore has released 10 new crops for 2007.
The soft interest rate regime is now over with the rates on government securities likely to harden for at least two years, economic think tank Institute of Economic Growth has said.
Borrowers haven't heard the last of interest rate hikes, as more banks are preparing to raise lending rates in the days ahead to offset increase in their cost of funds.
The interest rates that we have now, including the interest rate measure that we have announced, should be treated as benign.
The final guidelines to link the interest rate to external benchmarks will be issued by the end of this month
If you have availed a home loan from an NBFC, you can shift your existing home loan to a bank and benefit from the MCLR regime, suggests Ratan Choudhary, head - home loans, Paisabazaar.com.
He did not announce any rollback on diesel price hike.
"We are open for further reduction in prime lending rate," Indian Banks Association Chairman Dalbir Singh said in New Delhi while addressing a seminar organised by PHD Chamber of Commerce.
Home loans rates may have gone up, but banks seem to be in no hurry to hoist their benchmark prime lending rates.
Currently, banks follow system of internal benchmarks, including Prime Lending Rate, Benchmark Prime Lending Rate, Base rate and Marginal Cost of Funds based Lending Rate.
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Senior bankers are trying to impress upon the central bank that the shift to external benchmark-linked lending be postponed to April 1, 2020.
None of the four benchmarks suggested by the RBI is ideal as banks in India create loan assets from their deposits and not borrowing from the regulator or market, says Tamal Bandyopadhyay.
The big beneficiaries of this move will be the big three -- Bharti, Vodafone and Idea.
Most bankers say they will look at reducing deposit rates from April.
In putting the country's economy back on the rails, it is best that Narendra Modi and Arun Jaitley draw on grass-roots feedback and their own practical sense and native wisdom without allowing themselves to be sucked into the quicksand of economic punditry, says B S Raghavan.
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