Loan Rates Likely To Drop 25-75 bps

Given the recent cut in CRR, Repo Rate, SLR one could see that the cost of funds drop by up to 75 basis points, as leading state-run banks lower lending rates under pressure from the government keen to rev up the economy.

Many of the public sector banks — State Bank of India, Bank of Baroda, Indian Bank and Central Bank of India — confirmed on Tuesday that they were considering rate cuts following last week’s move by the Reserve Bank of India (RBI) to slash reserve ratios and cut short term rates and the government’s assurance of favourable policy measures.

Union finance minister P Chidambaram met with public sector banks’ chiefs on Tuesday to take stock of the financial position of banks at a quarterly review meeting. “We have had an extensive discussion and the Indian Banks Association, on behalf of the banks, has assured me that they will go through the matter and come up with some decisions on the price at which credit will be delivered to the different sectors,” Mr Chidambaram told reporters.

But in another development many of the private setcor banks like ICICI, Kotak and HDFC bank have indicated that they will not cut the Auto Loan rates just yet and they will adopt a wait and watch policy.