SBI, IDBI cut interest rates

11 Apr 2009

1

A day after bankers met Reserve Bank of India governor D Subbarao, the state-owned Industrial Development Bank of India on Thursday cut its benchmark prime lending rate by 0.5 per cent to 13 per cent effective from 15 April. The bank also reduced its deposit rates by 0.25-0.5 per cent across various maturities.

The State Bank of India, the country's largest lender, also said it would cut its deposit rates by 25-50 basis points, or 0.25-0.5 per cent, across different tenures from 13 April. The reduction in rates will be applicable for deposits below Rs one crore, SBI said.

According to the IDBI statement, one to three-year maturity deposits of up to Rs15 lakh will now attract a rate of 8.25 per cent as against the earlier 8.5 per cent, while 1,100-day deposits will carry a rate of 8.75 per cent as against 9.25 per cent.

''Even after the latest round of rate cut, our deposit rates are still attractive. As for BPLR, we are moving to align it with the rest of the banking sector,'' said R K Bansal, executive director, IDBI Bank.

At SBI, deposits with one year to less than two years maturity will now attract a rate of 7.75 per cent as against 8.10 per cent earlier, the bank said. Deposits with two years to less than 1000 days and 1000-day maturity deposits will carry rates of 8 per cent and 8.25 per cent respectively, against the earlier 8.25 per cent and 8.5 per cent respectively, the bank said.

Similarly, 3-5 years and 5-8 years deposits will now attract rates 8 per cent (8.5 per cent earlier) and 8.25 per cent (8.5 per cent) respectively.

The reduction in deposit rates is expected to bring down the funding costs for banks. At the meeting with Subbarao on Wednesday, bank chiefs had informed the central bank that net interest margins are likely to fall steeply in the fourth quarter of the just ended fiscal because of the high funding costs.

T S Narayanasami, chairman and managing director, Bank of India and chairman of the Indian Banks' Association, said earlier that it is in banks' own interest to bring down lending and deposit rates, and he expected more banks to cut their lending rates by 0.5 per cent and deposit rates by 0.5-0.75 per cent in the next 15 days.

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