The Hindu Business Line : Mixed reactions from bankers

Bankers were cautious while reacting to the recommendation of the RBI Working Group on replacing the Benchmark Prime Lending Rate with a new base rate.

“There could be variations in the implications of the proposed systems on large banks and small banks as the former will have lot of liquidity at their disposal. However, I cannot comment further as I need to study the report in full,” Ms Renu Challu, Managing Director, State Bank of Hyderabad, told Business Line.

Mr R.S. Reddy, Chairman and Managing Director, Andhra Bank, said various aspects, such as the scope to come below the BPLR/proposed base rate would be vital depending on the market conditions. “However, I can only give my complete view after studying the recommendations,” he added.

The new system will ensure transparency and is actually going to help us, said Dr N. Kamakodi, Executive Director, City Union Bank, welcoming the move.

Asserting that CUB had never resorted to aggressive under-cutting of rates just to increase the size of the balance sheet or loan portfolio, he said “we have always maintained a stable policy. Hence we are confident of the merit of introducing a system of base rate.”

Mr P. T. Kuppuswamy, Managing Director and CEO, Karur Vysya Bank, said, “We welcome this new trend. It will reduce unhealthy competition among bankers and simultaneously help borrowers get finance support at reasonable rates depending upon the tenor of the loan. The overall restriction of 15 per cent will also avoid unhealthy competition in the market.

“The committee has protected the DRI lending scheme as well as the export finance. The restriction of 15 per cent should be exclusive of export and DRI lending. Freeing of interest rates for loans up to Rs 2 lakh is a progressive measure.”

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