MUMBAI, Feb 8: Major public-sector banks are planning to revise their internal credit-ratings of corporates in a bid to push up lending rates. This will be done without jacking up the prime lending rates or raising the cap on them.The intermediaries are also planning to levy a penalty fee on blue-chip corporates that have been rushing to draw down funds from PSU banks and parking it with foreign and new private-sector banks in the form of certificates of deposit (CDs) or term deposits to make a cool spread of 5-6 per cent. "An arbitrage opportunity has suddenly cropped up as the differences in the PLR between state-run banks and foreign banks have widened substantially over the last fortnight with some of foreign banks hiking their lending rates by as much as 5 to 6 percentage points," a senior public-sector bank executive said. Consequently, some of the corporates which source funds from a consortium of banks are drawing down only from public-sector banks. "We are under tremendous pressure. Everycorporate is rushing to public-sector banks to draw down the limits as our lending rates are much lower than foreign banks. We suspect that all (this) money is not used for productive purposes. Some of the corporates are rushing to draw funds only to park it in foreign banks in the form of fixed deposits and certificate of deposits to make a hefty spread," the executive said.
Some of the foreign and new private banks offer over 20 per cent on 90-day certificates of deposit. "It is difficult to ensure the end-use of funds. We plan to slap a penalty of 200 basis points over and above the CD rate at which the fund is placed," another source said.
Major public sector banks like State Bank of India, Bank of India, Bank of Baroda and Punjab National Bank have pegged their prime rates at 14 per cent. This is in sharp contrast to the PLRs of foreign banks which have fixed their minimum lending rates around 20 per cent.
"It is very difficult to maintain a decent spread at the current level of PLR. We may revisethe internal credit-rating of corporates to raise the lending rates without making in change in the PLR or the bank over the PLR," the chairman of a nationalised bank said.
Among the state-run banks, the prime rates vary between 14 per cent and 14.5 per cent, while the spread over PLR is pegged at 3.5-4 per cent.
Senior bankers admit in private that it is difficult to operate at this rate. However, no bank is willing to revise its PLR northwards for fear of being singled out by the Reserve Bank of India and the finance ministry.
"We will try to hold on to the current level of prime rate till the next credit policy is announced in April. However, we are planning to restructure the credit ratings of our clients. This way, we will be able to charge a higher lending rate without revising our PLR," a bank chief who did not want to be identified said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
