April 4: The difference between public and private sector banks over interest rate cuts seems to be widening by the day.
ICICI Bank, the countrys biggest private lender, today virtually ruled out any reduction in rates unless government bond yields came down.
Punjab National Bank, on the other hand, feels there is still room for bringing down interest rates.
The bank has passed on the interest rate benefit to consumers as far as possible and there is no indication of any further cut unless the government (bond) rates eased, ICICI Bank managing director and CEO K.V. Kamath said in Calcutta today.
The rate of government borrowing is 7 per cent when bankers were expecting below 5 per cent on a 10-year (government) paper, he added.
Lending rates cannot be low if bond yields are high because banks will prefer parking their money in safe government bonds to lending out which carries risk.
Speaking to reporters in New Delhi, Punjab National Bank chairman K.C. Chakrabarty said, There is always headroom for interest rate cuts. Every month our technical panel meets, we only decide when the asset-liability committee recommends.
He said Punjab National Bank was the strongest lender in the country with the lowest prime lending rate at 11.50 per cent.
My prime lending rate is 75 basis points lower than the largest bank in the country and 350 basis points lower than the second largest bank in the country. There is headroom for rate cuts that side, Chakrabarty said.