Taking a cue from surprise interest rate cut by the Reserve Bank of India of 0.25 per cent, most of the banks have started reducing their lending rates providing relief to home and auto buyers. Starting with United Bank of India (UBI) that immediately announced a rate cut of 0.25 per cent on lending rates and Union Bank of India cut rate by 0.50 per cent, most banks are in line to tread the same path.
“It has been decided by the asset liability management committee on January 15, that the base rate of the bank will be reduced from 10.25 percent to 10 percent effective February 1,” United Bank of India said in a statement. The announcement came within hours of RBI reducing the benchmark interest rate by 0.25 per cent to 7.75 per cent with a view to boost growth.
SBI and ICICI Bank said the much- awaited lowering of lending and deposit rates would “definitely” take place now. While refraining from giving any specific timeline for such rate cuts by the banks, they said the way forward was certainly going to be a review of the rate cycles.
“Definitely, I think those cuts will happen that we have been talking for a while for easing of the rate cycle,” ICICI Bank CEO Chanda Kochhar said when asked whether the lending and deposit rates would come down now.
Earlier in the day, RBI decided to cut policy rate by 0.25 per cent to 7.75 per cent. Although the relief seems too little at present, industry experts believe that more rate cuts are to follow in coming a few weeks. This will allow more consumers to pay less for their home loan with EMI’s (equated monthly installment) coming down.
Society of Indian Automobile Manufacturers (SIAM) Deputy Director General Sugato Sen also said it was not enough although the move is a welcome one. “The 25 basis points reduction is going to have minimum impact on the EMIs. We expect the rates to further come down in the next few months and also the banks to reduce their lending rates,” Sen said, however adding it was a “very good beginning”.