Monday, November 10, 2008

PSU banks to cut PLR by 75 basis points, interest rate to soften by 25-50%

After having a meeting with Finance Minister P Chidambaram all the PSU banks have decided to cut their prime lending rates by 75 basis points. Therefore interests rates are likely to get soften as the cut can be between 25-50%. Moreover credit guarantee on loans would be extended to Rs one lakh crore and deposit rates will be reduced by 50 basis points.

Earlier, Finance Minister P Chidambaram had held a meeting with top executives of PSU banks to review the liquidity situation and performance of lenders. The meeting was organized after the leaders of the Indian industry had met Prime Minister Dr. Manmohan Singh and demanded for steps to improve liquidity and move to create environment favorable for lowering of interest rates.

The meeting was attended by the SBI Chairman O P Bhatt, PNB chief K C Chakrabarty, Bank of Baroda Chairman M D Mallya, Canara Bank head A C Mahajan, UCO Bank CMD S K Goel and top officials of the Finance Ministry and Reserve Bank of India (RBI).

Earlier on Sunday, Chidambaram said that he would ask the public sector banks to think about lowering lending rates to ease the liquidity crunch in the country.

While expressing RBI's latest policy package as right step to instill more liquidity in the system, Chidambaram said, "I am happy with the policy package announced by the RBI. When it announced its (peak season) policy on October 24, the RBI had promised swift action in case it is necessary to infuse more liquidity."

Previously on Saturday, the RBI had announced a slew of measures to instill liquidity in the system.

The apex bank had slashed the repo rate by 50 basis points to 7.5 per cent and the cash reserve ratio (CRR) by 100 basis points to 5.5 per cent and the statutory liquidity ratio (SLR) by 100 basis points to instill an additional Rs 85,000 crore into the system.

Before in October, the RBI had infused an additional liquidity of Rs.1, 85,000 crore in the view of global financial crisis.

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