Just before noon on Thursday, the Ficci-IBA Banking Conference was gathering pace at the Grand Hyatt in Santacruz East, Mumbai, when a public sector banker got a call.
Hesitant PSBs forced to slash by 75 bps
MUMBAI: Just before noon on Thursday, the Ficci-IBA Banking Conference was gathering pace at the Grand Hyatt in Santacruz East, Mumbai, when a public sector banker got a call.
Nobody knows where the call was from, but what followed was enough to set the dovecotes aflutter.
Disconnecting, the banker went into war-dial mode, as did some officials of Indian Banks Association (IBA).
A bit of context here would not be out of place: On Tuesday, after meeting finance minister P Chidambaram, bankers had agreed to cut their benchmark prime lending rate by 75 bps.
But some banks, like a south-based one, planned to snip only its home loan rate, and that too by less than 75 bps.
The finance minister, it seems, was angry that public sector banks were not falling in line and immediately cutting their interest rates across all sectors.
The IBA is said to have communicated Chidambaram’s message to heads of state-owned banks.
A finance ministry official and some leading government-owned bank heads confirmed the development.
“I got a call from IBA in the morning saying that we should cut lending rates by 75 bps across all sectors,” chairman and managing director of a mid-sized bank said.
By mid-afternoon, bank after bank started announcing prime lending rate cuts of 75 bps.
“There was a decision taken unanimously in the Tuesday meeting to cut PLR by 75 bps across the board. The finance minister wanted to ensure that all banks cut lending rates uniformly by 75 bps,” said the head of another state-owned bank.
“There were some banks that had not hiked their home loan rates when they had hiked their PLR in August. So these banks were a bit hesitant to cut their home loan rates by 75 bps,” said a banker. On Tuesday, at the meeting with Chidambaram, State Bank of India chairman O P Bhatt had suggested a 75 bps cut in PLR by banks.
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