MUMBAI, Feb 10: The prime-lending rates (PLR) of commercial banks will come down within the next six weeks, State Bank of India chairman MS Verma said on Tuesday."PLR will come down," Verma told reporters at a press conference held by the largest financial intermediary in the country to launch SBI FAST -- a cash-management product for corporates.
Verma also hinted that the rupee may settle at 40 to the greenback. Asked whether lower interest rates would lead to a fall in the rupee to 50 per dollar, Verma replied in the negative. "The rupee will not hit 50, but none can prevent it from hitting 40," he said.
"Call rates will rule around 9-10 per cent, and there will not be any problem on the liquidity front," Verma said.
The SBI chairman is bullish about the bank's credit offtake. "In the third quarter (October-December), we have disbursed about Rs 2,500 crore. The momentum will continue and we will be able maintain the growth rate," Verma said.
"We will carry on with the existing lending rates, maybe for the next six weeks, till the slack-season credit policy is announced," the SBI chief said in response to a question on how long it would be before rates were lowered.
Union Bank chaiman cum managing director (CMD) AT Pannir Selvam also said lending rates would come down. Selvam, who is also the Indian Banks' Association chairman, said: "There is no liquidity problem. We will bring down the lending rates by April." Both Verma and Selvam felt the Reserve Bank of India (RBI) might roll back some of the tight-money measures announced in January.The RBI had introduced a string of tight-money measures to jack up interest rates and squeeze liquidity out of the system on January 16 after the rupee hit a record low of 40.45 per dollar.
In a prompt response to the policy, SBI raised its PLR by one percentage point to 14 per cent.
Major public sector banks like SBI, Bank of India, Bank of Baroda and Punjab National Bank have pegged their PLR at 14 per cent, while Dena Bank, Central Bank and a few othershave kept it at 14.5 per cent. This is in sharp contrast to the PLRs of foreign banks, who have fixed their minimum lending rates at around 20 per cent.
Bank of Nova Scotia leads the pack with rate of 22 per cent, followed by Amerian Express Bank at 20 per cent, Bank of America and ABN Amro, 18.5 per cent and ANZ Grindlays, 18 per cent. Verma's statement is significant as some state-run banks plan to revise internal credit ratings of corporates to push up lending rates without formally jacking up PLR or raising the cap on it.
"It is very difficult to maintain a decent spread at the present level. We may revise the internal credit rating of corporates to raise lending rates without making any change in the PLR or the band over it," a south-based nationalised bank's chairman had said last week.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
