Bank of India cuts base rate by 25 bps; SBI says it can't.
Finance minister P Chidambaram was at it again on Wednesday, goading public sector banks to cut lending rates in order to boost consumer spending and industrial growth despite the fact that their cost of funds remains high.
“We have advised the banks to look at the base rates. While the base rate of State Bank of India (SBI) is 9.7%, the average of the other banks is 10.20-10.25%. Reduction in the base rate will be a powerful stimulus to the credit growth,” Chidambaram said after a top-level review attended by chairmen and managing directors of banks and financial institutions.
Since the Reserve Bank of India has reduced policy rates, banks should pass on the benefit to the customers, he said. “Banks will review their base rate in July and take an appropriate decision.”
To be sure, the RBI has cut policy rates by 125 basis points (bps) since April last year.
However, banks have not been able to cut rates at a similar pace because of stagnant deposit growth and lower credit demand.
Hours after the meeting, Bank of India cut its base rate by 25 bps to 10% from July 8.
SBI, however, ruled out any reduction. “We are already at the lowest. We are at 9.7%.
Other banks have been asked to come to SBI level,” chairman Pratip Chaudhuri said.
Chidambaram also announced that four lenders – IDBI Bank, Bank of Maharashtra, Indian Overseas Bank and Dena Bank – would be capitalised on a priority basis this year to prop up their Tier-I capital adequacy ratios. The Budget had earmarked Rs 14,000 crore for capital infusion in banks this fiscal.
“Priority would be given to these four banks. They will also plough back some of the retained earnings. They will also find other ways to raise capital. I think by the end of the year, these four banks will move up to the 8% internal norm,” said Chidambaram.
The banks have been asked to submit a plan on their capital needs by the end of this month and focus on their top defaulters.
On financial inclusion and branch penetration, Chidambaram said about 8,000 branches would be added this fiscal, creating employment opportunity for at least 50,000. In addition, one lakh kiosks will come up for people to access banking services.
Finance minister P Chidambaram was at it again on Wednesday, goading public sector banks to cut lending rates in order to boost consumer spending and industrial growth despite the fact that their cost of funds remains high.
“We have advised the banks to look at the base rates. While the base rate of State Bank of India (SBI) is 9.7%, the average of the other banks is 10.20-10.25%. Reduction in the base rate will be a powerful stimulus to the credit growth,” Chidambaram said after a top-level review attended by chairmen and managing directors of banks and financial institutions.
Since the Reserve Bank of India has reduced policy rates, banks should pass on the benefit to the customers, he said. “Banks will review their base rate in July and take an appropriate decision.”
To be sure, the RBI has cut policy rates by 125 basis points (bps) since April last year.
However, banks have not been able to cut rates at a similar pace because of stagnant deposit growth and lower credit demand.
Hours after the meeting, Bank of India cut its base rate by 25 bps to 10% from July 8.
SBI, however, ruled out any reduction. “We are already at the lowest. We are at 9.7%.
Other banks have been asked to come to SBI level,” chairman Pratip Chaudhuri said.
Chidambaram also announced that four lenders – IDBI Bank, Bank of Maharashtra, Indian Overseas Bank and Dena Bank – would be capitalised on a priority basis this year to prop up their Tier-I capital adequacy ratios. The Budget had earmarked Rs 14,000 crore for capital infusion in banks this fiscal.
“Priority would be given to these four banks. They will also plough back some of the retained earnings. They will also find other ways to raise capital. I think by the end of the year, these four banks will move up to the 8% internal norm,” said Chidambaram.
The banks have been asked to submit a plan on their capital needs by the end of this month and focus on their top defaulters.
On financial inclusion and branch penetration, Chidambaram said about 8,000 branches would be added this fiscal, creating employment opportunity for at least 50,000. In addition, one lakh kiosks will come up for people to access banking services.
No comments:
Post a Comment