PSBs to rejig loan rates in April

February 08, 2007: Public sector banks, which have been asked by the government to hold their home loan rates, are expected to review their interest rates on other loans in early April.

Most public sector banks are experiencing pressures on margins with continuing rise in cost of resources, but none of them want to take a call on lending rates now.

Punjab National Bank has no plans to raise interest rates till the end of March 2007, said K Raghuraman, the bank’s executive director.

A senior official at State Bank of India (SBI), the country’s largest bank, said there is definitely pressure on margins but it does not mean the bank will immediately hike its prime lending rate.

“There is still scope to reprice loans which were contracted at rates below the PLR in the past,” he said.

SBI has already raised its PLR by 100 basis points in three steps in 2006-07 thus far. The second largest bank, ICICI Bank, yesterday effected a steep 100 basis points increase in its benchmark rates, which took its cumulative increase in benchmark rate to 375 basis points since January 2006.

Bank of India executive director, K R Kamath, said the pressure on margins will depend on trends in deposit rates as banks focus on balance sheet growth in the fourth quarter. A case for raising lending rates would arise only if there is further rise in deposit costs, he said, suggesting that there is no immediate trigger for upwards movement of its PLR.

K N Prithviraj, chairman of Oriental Bank of Commerce, said there is no immediate plan to revise lending rates soon after the hike effective January 15, but the bank will now be careful in choosing new accounts.

The bank has enough funds to meet credit demand till March and would not react to interest rate hikes immediately, he said.

Source: Business Standard