"Many banks have raised their BPLR (benchmark prime lending rates) by 0.75 per cent to 1 per cent, but all existing home loans, all new home loans up to Rs 30 lakh, existing automobile and educational loans are being spared from the hike," the finance minister, Mr P Chidambaram, said after reviewing the public sector banks' performance here today.
This was the finance minister's first meeting with bankers after the apex bank raised the key policy rate to nine per cent following which most PSU banks, including the largest lender, State Bank of India (SBI), hiked their lending rates by 50-100 basis points.
Referring to undue competition among banks to take bulk deposits from public sector organisations, the minister said he would ask the Department of Public Enterprises to instruct public enterprises not to resort to the bidding route, and deposit 60 per cent of their surplus funds with the public sector banks.
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By Sumit Kumar, Section Loans
Posted on Wed Aug 13, 2008 at 11:52:43 PM EST
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The finance minister said profitability of banks had declined to some extent in the first quarter because of a fall in returns from treasury operations. He, however, hoped that some of the losses in treasury operations would be recovered if market sentiments improve.
He said both gross and net NPAs of banks had declined in the first quarter compared to what they had as on 31 March 2008.
Later, the SBI chairman, Mr OP Bhatt, said the interest rates had almost peaked and were unlikely to change unless RBI took any further action.
"Oil prices are softening, monsoons are good, commodity prices, except steel, seem to have peaked and demand pull because of Olympics also seems to be over," Mr Bhatt said.
However, Punjab National Bank (PNB) chairman and managing director, Mr KC Chakrabarty, said the interest rates had not yet peaked. He countered concerns on increasing lending rates, saying that borrowing rates had also been hiked. It was thus advantageous for those who saved, which then allowed the bank to lend.
Source: Statesman News Service, Aug-13-2008
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