Four senior public and private sector bankers told Reuters on Friday that they might only cut lending rates by 5-10 basis points. For the banks — often stuck with bad loans and heavy provisioning — any cut in loan rates is unlikely without a corresponding fall in deposit rates, which will require cash conditions to improve significantly, say bankers. And banks are reluctant to cut deposit rates in the fiscal year's last quarter, as they are keen to shore up their books while not losing hefty deposits. Indian banks price their benchmark loan rates, known as the marginal cost of funds based lending rate (MCLR), mainly based on the cost of deposits. Unless banking system liquidity rises, he said, "we are not seeing any substantial fall in lending rates across the board any time soon."

Source: Mint February 08, 2019 10:24 UTC