Banks Rule Out Any Immediate Cut In Lending Rates Due To High Cost Of Funds


The poor deposit collection problems for the state-run banks were compounded with the finance ministry’s directive asking them to bring down their bulk deposit ratio to 15 per cent of their total deposits by March 31.

In a move that some experts saw as a sign of a weakness in deposit mobilisation, SBI upped its deposit rate offering by 0.25 per cent last month.

Deposits have grown only about 13 per cent during the financial year, while credit has grown more faster at close to 17 per cent. In the absence of sufficient deposits, the credit deposit ratios for the banks go up, according to the latest RBI data.

When asked if the central bank is concerned that its policy actions were not getting transmitted into actual lending rate cuts by banks, deputy governor KC CHakrabarty over the weekend had said, “It is up to the banks, right? What will RBI do? It is a free market.”

S.S. Mundra, who heads of the second largest lender Bank of Baroda, said the possibility of a rate cut can be discussed only after the liquidity situation improves in the system.

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Source: PTI