Thursday, June 19, 2008

UBI not to hike lending rates but might review incase of increase in CRR

The Reserve Bank of India has raised repo rate to control rising inflation. Due to rising pressure banks have started considering hiking the lending rates as well as depositing rates. Though, United Bank of India (UBI) in view of rising pressure in the net interest margins still have not made up its mind to hike the lending rates at the moment but might review its decision if the apex bank further increases the CRR.

"It is increasingly becoming difficult to maintain the interest rate structure, considering the immense pressure in the NIM. As of now we can adjust the price as most of the lending rates are below the PLR (Prime Lending Rates), however question remains for how long we would be able to sustain with this," said PK Gupta, Chairman and Managing Director, UBI.

The CMD also stated that the bank’s credit off take has been slower as compared to the March, 2008 levels.

"There has been a decline in the credit off take compared to the last quarter," he said.
"Logically speaking, there would be a slow down in the credit off takes on the account of the higher interest rates," he added.

According to the sources closely related to the development of the bank stated that bank has gained particularly in the corporate advances and home and auto loan segments.

"We are experiencing a poor credit growth since March, and the corporate lending has suffered the most during this period," the executive from the bank said.

In the mean time UBI has increased interest rates on domestic term deposits by 25 to 50 basis points.

The new deposits rates for the one year time span has been increased to 8.5 per cent while for the period between two years to three years it will be 8.75 per cent, compared to 8 per cent earlier.

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