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SBI hints at further cut in lending rates


Mike Sangma,CNN-IBN
Feb 03, 2009 at 01:30am IST

New Delhi: There is still room for a cut, says State Bank of India (SBI). On Saturday, India's largest public sector bank capped floating home loan rates at eight per cent for a year.

Chairman O P Bhatt says it can fall further and has extended the scheme.

“It is only for new customers and in new customers we have only covered two segments - home segment and the other is SME,” says SBI Chairman, O P Bhatt.

Taking a cue from SBI and after a meeting with Finance Minister Pranab Mukherjee, other public sector banks will follow.

Punjab National Bank (PNB) says falling inflation will soften rates.

Corporation Bank could reduce both deposit and lending rates by half to one per cent as early as Tuesday. The sentiment is echoed by UCO Bank.

“There is a good scope to cut lending rates because there is downfall in inflation. So still there is a scope of 200 bps to be cut on to the deposit rate and whatever we have cut on the deposit rate we have agreed that we will pass on to the borrowers by equally adjusting our lending rates,” says CMD UCO Bank, S K Goel.

Private players are still to follow the lead, despite repeated calls by RBI and the Finance Ministry.

ICICI Bank's current floating interest rate ranges between 11-12.5 per cent.

But India's second largest private lender HDFC Bank may soon follow SBI's lead.

Replying to a question on interest rates at the CNN-IBN Indian of the Year Award in New Delhi, HDFC Bank MD, says a rate cut is on the card.

Meanwhile, smaller PSU banks may also find it hard to follow SBI's lead. The high cost of funds will still be a burden in the current economic situation.

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