Less posibility of interest rate cut

• rajesh_sangvi
• April 4, 2009

KOLKATA: Amid a string of interest rate cuts by state-run banks since April 1, country’s biggest private lender ICICI Bank on Saturday said

chances of it reducing rates are less unless government bond yields come down.

The bank has passed the interest rate benefit to consumers as far was possible and there is no indication of any further cut unless the government (bond) rates eased, ICICI Bank
Managing Director and CEO K V Kamath said.

“The rate of government borrowing is 7 per cent when bankers were expecting below 5 per cent on a 10-year (government) paper,” Kamath added.

Lending rates cannot be low if bond yields are high because banks will prefer parking their money in safe government bonds to lending out which carries risk.

“We may want more rate cut though rates have corrected by 3-4 per cent,” he said pointing at government borrowing rates.

Thirteen PSU banks have already cut their lending rates by up to 0.50 percentage points this fiscal. Foreign lender Citibank has also reduced interest rates by 0.50 percentage points.

Two days ago Cabinet Secretary K M Chandrasekhar had asked public sector banks to examine the possibility of reducing interest rates.

• Last Modified: April 4, 2009
• Filed Under: MARKETS