MUMBAI: Home loan and consumer durables loan borrowers could look forward to softer interest rates. Following the reduction in the cost of funds, banks are reviewing the interest rate structure, according to the Indian Banks’ Association (IBA).
Speaking to the media after the managing committee meeting on Friday, IBA CEO H N Sinor said, “Banks are have seen an improvement in their spreads during the financial year. This is because the incremental credit-deposit ratio this year has fallen to 49% from 130%, seen a year ago. Banks which were forcedto raise a large chunk of funds a year ago through bulk deposits are able to renew liabilities at a lesser rate, with a clear differential of 200 basis points.”
Mr Sinor pointed out this will clearly give banks the leeway to make fresh lending at lower rates. This follows a statement from the Union finance minister a few days ago, expressing concern on the slowdown in the growth in consumer durables and mortgage loans. The IBA managing committee meeting was attended by the heads of 18 banks, of the total 31 member banks.
Bank chairmen who attended the meeting have told the IBA that they will review the rate structure in the forthcoming meetings of their respective asset and liability committees (over the next week to 10 days). So far, State Bank of India, Canara Bank and Axis Bank have lowered their prime lending rates while Bank of Maharashtra has cut rates on home loans and consumer durable loans.
