Mumbai: The country's largest private sector lender, ICICI Bank was the first to cut interest rates on Tuesday after the RBI lowered its short-term lending and borrowing rates, but housing loan major HDFC said it has no plans to cut the rates now.
In fact, it was private sector banks which were reluctant to cut lending rates earlier when the RBI had eased money supply through a series of rate cuts.
The RBI reduced short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each to 4.75 per cent 3.25 per cent respectively. Taking cue from the RBI, ICICI Bank cut both lending and deposit rates by up to 50 basis points.
Describing the RBI's stance as an "innovative and far- reaching policy," ICICI Bank's Managing Director & CEO, K V Kamath, said it would have a significant impact (on spurring economic growth).
Commenting on RBI annual monetary policy 2009-10, SBI Chairman O P Bhatt said, "it (the RBI rate cuts) is a very clear-cut signal that interest rates should ease."
Meanwhile, RBI Governor in his customary press meet said, "Indeed, the further policy rate cuts effective as a part of this policy should be a definitive signal for reducing lending rates."
HDFC's Chairman Deepak Parekh said, "We have no plans to lower our interest rates as of now".
On RBI action, ICICI Bank Joint Managing Director Chanda Kochhar said the proactive stance in the current environment is commendable and the continued support to systemic liquidity and lower interest rates is welcome.
The policy also strikes a good balance between promoting growth and financial sector development and stability.Overall, the policy indicates development of a healthy financial sector and a stable macroeconomic environment, Kochhar said.
The credit policy statement is a welcome articulation of a growth oriented policy stance, she added.
UCO Bank CMD S K Goel said "as far as my bank is concerned, we are going to reduce our BPLR by 0.25 per cent."
Bankers are of the view that if lending rates are slashed, correspondingly deposit rates have to soften as it would bring down the cost of funds for banks.
"We might also cut our deposit rates across various maturities by 0.25-0.50 per cent," Goel said.
Bank of Baroda CMD M D Mallya said RBI has given a strong signal that interest rates should ease. It is for individual banks to find out how they can balance their asset and liability position, he added.
"There would be a downward bias on interest rates. We need to see several things... the cost of deposit has to decline," he said.
Echoing views, Indian Bank CMD M S Sundararajan said it is a signal for softer interest rates and banks will also address correspondingly.
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