Apex Chamber of Commerce and Industry (Punjab) welcomes rate cut by banks

Ludhiana, April 1, 2016: Apex Chamber of Commerce and Industry (Punjab) president P.D.Sharma has said RBI is to announce its Monetary Policy next Tuesday April 5, 2016. Ahead of this date some major banks have announced rate cut. He has welcomed this trend. At present the lending rate is fixed on base rate. This has now been shifted to a marginal cost of fund based rate (MCLR). SBI and HDFC are the first to announce lower rates according to MCLR. While MCLR for SBI and HDFC bank is 9.2% for tenure of one year.
Bank of Baroda has announced even a deeper reduction of rates.
At present SBI offers home loan at 9.55% based on the base rate of 9.3% plus a spread 0.25%. SBI shall retain the current spread. Accordingly home loans will be 0.1% lower than it is now.
The difference between the base rate of SBI and Bank of Baroda was 0.35% but under the new regime these have fallen to 0.10%. The cost of deposits is but determines the MCLR. Banks have been lowering their deposit rates for more than a year now.
SBI’s deposit rate for maturity of up to one year is now 7.25% and for Bank of Baroda it is 7.3%, for HDFC banks it is 7.5%.
RBI had asked banks to price fixed rate loans up to 03 year on marginal cost of funds and to review and publish their MCLR of different maturities every month on a preannounce date. Under MCLR banks will had to take into account their cost on incremental deposits across various maturities. At SBI the MCLR will range between 8.95% and 9.35% for loans of various tenures. At Bank of Baroda and HDFC bank it is between 8.95% and 9.35%.
Top five lenders in terms of market share are SBI and its subsidiaries (9%) HDFC group (18%), LIC Housing finance 9%, ICICI bank 9% and Axis bank 5% as on 2015.
Mr. P.D. Sharma, President, Apex Chamber of Commerce & Industry (Pb.) has written to RBI that risk weightage for MSME’s should be reviewed. Most of the borrowers of this sector offer adequate collateral. As such there should not be any risk weightage for this sector. However, it is an anomaly that big loan are offered without collateral. As a result banks and the country suffer heavy losses. This is a very evident now.