Banks considering slashing interest rates

UCO Bank, Kolkata based lender has plans to reduce deposit rates by up to a 100 basis points (bps) while public sector banks are trying hard to pressurize the finance minister for slash in postal savings rate as a predecessor to lowering deposit rates. While from July Allahabad Bank will be slashing its benchmark prime lending rate (BPLR) by 25 bps to 12%.

On Monday UCO Bank chairman and managing director SK Goel informed, "We are likely to cut deposit rates by 50-100 bps. A final decision to this end will be taken in the first week of July."

Speaking on the sidelines of a banking conclave organized by Ficci’s eastern regional council Mr Goel, said bank’s interest rate margins is under pressure at 1.95% for the quarter to June. Since March 2009 bank BPLR has been at 12.5%.

In his speech at the conclave Mr Goel informed, "Banks need to reduce deposit rates before lowering lending rates. But as long as small savings rates with post offices continue to be at 8%, it would be difficult for banks to cut rates significantly. We’ve requested the finance minister to look into this aspect".

However UCO is hoping of 15-20% growth in profitability for the June quarter. Mr Goel said, "We are expecting higher profits based on improved treasury income, non-interest income and recovery of bad loans," and added that the bank registered a treasury income of around Rs 105 crore, as against Rs 60 crore in the corresponding quarter to June 2008. Its net profit for the period between April and June 2008 stood at Rs 133.44 crore.