The Hindu Business Line : ‘1-year deposit rates may hold at 8.5%’

Rate cues: The Finance Minister, Mr P. Chidambaram, and the Minister of State, Mr Pawan Bansal, addressing a press conference after a meeting with the chief executives of public sector banks, in the Capital on Wednesday.

Our Bureau

New Delhi, Aug. 1 With number of public sector banks now inclined to lower one-year deposit rates by 50 basis points and some even having already announced a reduction, the Finance Minister, Mr P. Chidambaram, today said that deposit rates are likely to hold at the 8.5 per cent levels in the near future.

“Many banks have already reduced deposit rates by 0.5 percentage points. Perhaps that is where they will hold it now,” he told newspersons after a meeting with CEOs of the banks on Wednesday.

“By and large, banks are offering deposits at 8.5 per cent. My impression is that is where it will hold. But I cannot direct banks to do this or that.”

The public sector banks that have reduced one-year deposit rates over the last two days are Bank of Baroda, Canara Bank and Bank of India.

Vijaya Bank said on Wednesday that it would bring down its one-year deposit rates by 50 basis points.

On whether he expected the lending rates to see downward movement in line with lowering of certain deposit rates, Mr Chidambaram made it clear that it was for the boards of banks to take the final call on lending rates.

“I am told that many of the borrowers are borrowing at sub-PLR rates,” he added.

The Minister, however, is understood to have suggested that the bank chiefs pass on the benefits of any reduction in deposit rates to borrowers in productive sectors.

On the RBI’s latest monetary policy measures, he said that they will have “marginal impact” on the public sector banks, and that their balance sheets were “healthy enough” to absorb this impact.