TimesBank, for instance, has introduced a medium-term prime lending rate (MTPLR) for loans between three and five years. The bank's MTPLR is pegged at 14 per cent -- 200 basis points below its prime lending rate. TimesBank has already received 15 proposals from customers to avail of the MTPLR. "You could say that the introduction of our MTPLR has been to offset the current trend in the economy," said TimesBank executive director Pradip K Pain.

Though the new banks have not witnessed any negative growth in bank credit, most banks have admitted to a stagnation in credit offtake. While aggregate deposits continue to grow at healthy levels, bank credit shows no signs of picking up, thereby increasing the liability costs of banks.

"Our bread and butter products like term loans andoverdrafts have been hit since corporates can raise funds through other instruments like commercial paper and non-convertible debentures which works out to be cheaper," said IDBI Bank managing director Deepak Mukherjee. "There has been premature repayment by these companies and they have opted instead for CPs and NCDs," he added.

"The focus has now shifted from asset management to liability management," said a senior executive with a private bank. TimesBank has managed to reduce its cost of funds by 1 per cent, by turning away high-cost deposits. Other banks, which until recently had internal caps on the level of certificates of deposit (CDs) they could raise, have revised these caps downwards in order to reduce liability costs. While the new banks earlier used CDs as a means to increase their deposits levels, today CDs are being accepted only for asset-liability matching purposes.

IndusInd Bank has revised its internal cap on CDs to 25 per cent from 30 per cent last year. The bank is also making aconscious effort to reduce its FCNR(B) portfolio, which constitutes a large chunk of its deposits. "While the cost of six-month FCNR(B) deposits is 5.5 per cent and six-month forward cover is at 10-12 per cent, this takes up the cost of these deposits significantly," said a senior official at the bank.

"The full impact of our reduced cost of funds will be felt only at the end of the year," said the official. IndusInd's cost of funds in 1997-98 stood at 10.31 per cent. The bank is now concentrating on building up its savings and current account base, which currently constitute 10 per cent of total deposits.

IndusInd Bank has launched a marketing exercise and will meet major clients over the next two weeks to work out means of pushing credit. The bank is also looking at fixing its MTPLR at 15 per cent -- 100 basis points lower than its PLR.

"While cost controls on the administrative front are monitored on a continuous basis, the current situation has made us start looking at it closer," said Mukherjee."Banks are mostly cutting back on administrative costs by reducing their ad-spend," said another executive from a private bank. HDFC Bank, for instance, decided it could do without a public relations firm, earlier this year.

While the nine new banks bucked the trend in the first half of the last financial year by posting a 10 per cent credit growth, the current financial year is not expected to be as good. For the year ended March 31, 1998, these banks posted a 41 per cent growth in advances and a 62 per cent rise in deposits.