The second largest lender in India, ICICI bank has cut the benchmark lending rates by 50 basis points with effect from 6 June2009. ICICI bank did not change its deposit rates and the current cut in the lending rate would benefit the existing retail loan customers who have availed of loans at floating rates.
The new borrowers would also be benefited due to the cut in the lending rate by the ICICI bank. While it is expected that the largest bank of India, State Bank of India declare a cut in its lending rates. The Chairman of State Bank of India, O P Bhatt said to media that there were possibilities of cut in the lending rate by 25 basis points.
In last six months, ICICI Bank has reduced its lending rates 150 basis points, and it is expected that more public sector banks and private banks would declare cut the in the lending rates. The impact of the global slowdown hit the Indian industry and the banking sector needs to take care of the lending rates in order to maintain its financial position strong.
The Reserve Bank of India (RBI) has been approaching both the public sector and private sector banks for reducing the lending rates. For last eight months, RBI has been taking action to check the impact of liquidity crisis on Indian economy. On the other hand the RBI pumped huge money into the system to stabilized the soaring inflation rate last year.
The reduction in the lending rates by banks would be helpful for the businessmen and industries and they can borrow funds from bank at lower rates. The prime lending rate (PLR) of ICICI Bank (FFR) is 12.75 per cent and Benchmark advance rate is at 15.75 per cent. While the PLR of Punjab National Bank is 11 per cent, State Bank of India is 12.25 per cent, HDFC is 13.75 per cent and Axis Bank is 14.75 per cent, according to media reports.
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