Four PSU Banks cut BPLR atleast by 25 bps

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Mumbai, Feb 20 (UNI) Four public sector banks, including India's largest lender State Bank of India, today announced the second round cut in their benchmark prime lending rates by atleast 25 basis points (BPS) with barely ten days to go for the Union Budget.

The other banks were Canara Bank, Bank of India and the Union Bank.

This is the first time in the recent past that the banks had resorted to cuts twice in a month following Union finance Minsiter P Chidambaram and the Reserve Bank of India suggestion to the banks to consider a revision in the lending rates to ease the liquidity condistions.

Private Banks including second largest lender ICICI bank, however, chose not to effect any change in the rate cut, and were awaiting the budget to take a decision.

SBI announced the downward revision by 25 bps to 12.25 per cent per annum from 12.50 pc pa, late evening, which will be effective from February, 27. Earlier in the afternoon, Canara Bank announced a cut of 25 bps bringing the lending rate to 12.75 per cent. Bank of India, Union Bank have also reduced PLR by 50 bps to 12.75 per cent. Going ahead, BoI also reduced consumer loan rates by 300 bps to 12.75 per cent and has reduced home loan rates by 75 bps to 9.75 per cent for loans up to Rs 20 lakh.

Nevertheless, it happened at a time when normally the call money rate, the rate at which the banks really borrow money, was moving at a higher range-band between 6-8 per cent. Though, the PSU Bankers seemed optimistic on their move and said they might increase their volume of business and other income to absorb the loss if it occurs.

'' The rate cut will definately have a sort-term impact on the net interest margins of the PSU banks, which would go down in the last quarter of this fiscal comparatively,'' a senior SBI official told UNI.

Majority of bankers expressed the same sentiments. They said, however, February and March would be a period when their might be slight tightness, but later things would be smooth in the sector.

They expect the liquidity situation to really become loose and see more money in the banking system by the begining of the new fiscal.

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