Retail loans have started getting cheaper.
On Tuesday, Punjab National Bank (PNB) slashed rates on cars, two-wheelers and consumer durables by 1-2.5% and announced full waiver of upfront fees and documentation charges.
Oriental Bank of Commerce (OBC), too, slashed its rates by 0.25% for these segments.
IDBI Bank, on its part, said it will offer all home and auto loans at the base rate of 10.25%.
The State Bank of India (SBI), India's largest lender, also indicated that it is considering a reduction in retail loans.
"We have received communication from the government about what sort of retail lending we can look at in the coming months. But we are waiting for final clearance," A Krishna Kumar, managing director, national business, SBI, said.
The finance ministry had said last week that it will provide additional funds to public sector banks in a bid to allow them to offer cheaper loans and thereby boost spending.
"I think what they are looking at is ensuring that people, specially during the festive season, are able to access loans for purchase of consumer goods and consumer durables to the extent that it is feasible," SBI chairperson Arundhati Bhattacharya said later in the day.
Non-performing assets in consumer and auto sectors remain healthy, Kumar pointed out, but categorically ruled out any reduction in interest rates on home loans. "Home loans
are practically lowest priced and so there is no scope for reduction there. But we are looking at other products like car loans," he said.
But on the flipside, the lenders have started lowering interest rates on fixed deposits.
Soon after the Reserve Bank of India announced a 50 basis points reduction in the marginal standing facility (MSF) rate on Monday, OBC cut its interest rate on bulk deposits with maturity of 180 days to less than two years by 0.25%.
On Tuesday, SBI followed suit with a similar reduction on deposits of Rs 1 crore and above for 7-60 day tenors, effective Thursday.
Arun Kaul, chairman and managing director of UCO Bank, also, indicated a reduction in deposit rates as the liquidity situation improves. "Since the MSF rate has come down, short-terms deposit rates can also be reduced."
