PSU banks tune in to FM, cut prime rates

MUMBAI: Large public sector banks have decided to lower their prime lending rates (PLRs) by 0.75%, in line with the commitment made to Union finan
ce minister P Chidambaram on Tuesday.

Bank of India, Canara Bank, Indian Overseas Bank and Syndicate Bank have decided to lower lending rates from 14% to 13.25%. In case of IOB, the asset liability committee has cleared the proposal and approval from the board of directors is expected within a few days.

Among other banks, Union Bank of India and Punjab National Bank took the lead in cutting PLR by 50 basis point to 13.5%, a few days before the finance minister met bank chiefs.

Bank of Baroda chairman and managing director MD Mallya and Bank of Maharashtra CMD Allen Pereira have told news agencies that they plan to reduce their lending rates by 75 bps, while UCO Bank CMD SK Goel has said that the bank plans to reduce lending rates by 50 bps next week.

Chiefs of private banks, who met finance secretary Arun Ramnathan on Wednesday, too said that they were looking at a cut in PLR soon. While the PLR of most of the PSU banks stands at 14% before the cut, the PLR of private banks is between 16% and 17.5%.

SBI’s PLR stands at 13.75%. On the deposit side, most banks have decided to hold on to the peak rate till the end of this month, except Union Bank of India which plans to withdraw the scheme by November 10. Bank of India and Punjab National Bank have officially said that they would discontinue the scheme by end-November, while others are likely to announce closure of the scheme sometime this month.

At the same time, banks have mobilised substantial money through the special deposit scheme where they were offering 10.5%. Sources said that State Bank of India, which offers 10.5% for 1,000 days, has collected around Rs 13,000 crore, while Canara Bank has raised Rs 5,000 crore till October 24 from the 500-day scheme. Union Bank of India has mopped up around Rs 4,000 crore from the 900-day scheme and IOB collected Rs 4,000 crore for its 720-day scheme.

Flight of deposits from some private banks to public sector banks and the steep fall in the stock market helped banks mobilise huge money under the special scheme. Many depositors withdrew deposits from private banks and shifted accounts to government-owned banks after the collapse of Lehman Brothers in October.

Source: economictimes.indiatimes.com