Following Budget proposals, banking industry
anticipates Bank Rate cut
Team NetScribes
The murmur is back in the air. The Reserve Bank of India will be cutting the Bank Rate by 50-100 basis points within a few days. In other words, when the finance minister gives the cue, Bimal Jalan has little option but to follow suit.
By cutting the small savings rate by 100-150 basis points on Wednesday, banks were served a fiscal-end gift - they could push down the cost of their deposits and at the same time book more profits on account of the spurt in the secondary market value of their government securities holding.
Obviously, as a quid pro quo, banks would now be under pressure to pass on some of the benefits to the consumer in the form of lower lending rates.
After the Budget, the finance minister went on record saying that he has done his job by cutting interest rates and that it was now up to the RBI to act.
"PLRs and deposit rates are dependent on the Bank Rate cut. The savings rate cut has facilitated another cut in Bank Rate by the RBI," said Ashish Parthasarthy, treasury head at HDFC Bank.
RBI has recently cut the Bank Rate from 8% to 7.5%. The move resulted in the State Bank of India slashing its prime lending rate to 11.5%.
"We can expect two more rate cuts of 50 basis points each before April 2001," said Tarun Mehrotri, treasury head at HSBC.
When contacted, SBI Chairman Janaki Ballabh did not want to comment on a possible Bank Rate cut.
ALSO READ:
The Budget 2001-2002 Special
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