K. R. Kamath in New Delhi on Thursday. Picture by Ramakant Kushwaha
New Delhi, Jan. 31: In a mixed response to RBI’s rate cut on Tuesday, Punjab National Bank (PNB) and the Union Bank of India today trimmed their minimum lending rates by 0.25 per cent to 10.25 per cent, while Oriental Bank raised deposit rates by up to 2.25 per cent on select maturity buckets.
While PNB’s rate cut is likely to make auto, home and corporate loans cheaper, Oriental Bank’s move will attract short-term funds.
Analysts, however, feel banks should cut deposit rates to protect margins.
“We have decided to pass on the benefit of the rate cut to our customers but have not taken a call on the deposit rates,” PNB chairman and managing director K.R. Kamath told reporters today.
PNB’s new rates will come into effect from February 9.
Earlier this week, the Reserve Bank of India cut the repo rate 25 basis points to support the economy. It also injected Rs 18,000 crore of additional liquidity by reducing the cash reserve ratio by the same margin. Following the move, the State Bank of India cut its base rate by 5 basis points.
The lowering of the base rate will provide relief to prospective borrowers as well as existing borrowers who had obtained loans from banks at a floating rate of interest.
Meanwhile, Oriental Bank raised fixed deposit rate for maturities ranging from one-month to 45 days to 7.25 per cent from 5 per cent.
The revised FD rates, to apply for deposits below Rs 1 crore, will come into effect from tomorrow.
The bank, however, kept the deposit rates for maturities of above one year unchanged.
The increase has been effected for fixed deposits ranging from one month to one year.
PNB today reported 13.5 per cent growth in net profit at Rs 1,306 crore for the third quarter on account of a decrease in provisions and higher recovery.
The bank had posted a net profit of Rs 1,150 crore for the December quarter of the previous fiscal.