Below is the verbatim transcript of KR Kamath's interview on CNBC-TV18
Q: I am a little confused by your press release, because it does not quantify what cut are you actually offering? You say you have done away with the full waiver of the processing fee on housing, car and two wheeler loans. Can you give us the exact quantum of the cut?
A: If you see the line below that we have said that the rates of interest have been reduced by 1 to 2.5 percent on various loans. If you look at the car loans there has been a reduction of about 1.10 percent. We are presently charging 11.75 percent floating rates on the car loans. We have now reduced it to 10.65 percent on a fixed basis. So, there has been a reduction of about 1.10 percent on the car loans.
If you look at the two wheelers, we have said that 12.25 percent, two wheeler loans that were less than three years was 13.25 percent, there is a reduction of 1 percent and where the two wheeler loans were repayable after three years at 14.75 percent, the reduction is about 2.5 percent. Personal loans for the consumer durables have also been brought down by 1 to 2.5 percent.
The two wheeler loans and consumer durable loans are given to the borrowers whose salaries are credited to our accounts or they give us a check off facility for deduction of the installments and remitting it to us directly. So, the rate of interest has been reduced by 1.10 percent in car loans to up to 2.5 percent on two wheelers and consumer durables.
Q: How have you been able to be as aggressive as you are as far as bringing down rates is concerned? Oriental Bank of Commerce has been able to cut rates by 25 basis points. State Bank of India today said that there is no case for bringing down home loan rates at this point in time. On what basis have you been able to be this aggressive?
A: There is no corporate credit pick up that is happening. We need to look at building the retail credit only. Secondly, RBI on Monday announced certain reduction in the MSF rates as well, to that extent, the cost of funds are likely to come down.
Thirdly, in the case of two wheeler loans and consumer durable loans, the delinquency should be the least to that extent and these reductions or loans will be given to people who are drawing their salary through us or where there is a facility for repayment. So, if you are in a position to contain delinquencies in these things then you can have an assured repayment, then the cost of lending can be brought down and that is what went into reducing this.
Q: There seem to be contradictions coming in from the public sector banking space, because the new chairman of State Bank of India (SBI) Arundhati Bhattacharya said that the fact that the MSF rate has been brought down by 50 bps is not going to have any impact as far as the lending rate is concerned. Aren't you saying the exact opposite?
A: If you see yesterday's certificate of deposit (CD) rate and today's CD rate, the CD rates have come down by about 30 bps and wholesale deposit rates will also come down because of this. Maybe a fortnight back, the CDs were quoted at 9.5 percent and today it has come down to 9 percent.
We expect that and the RBI governor has already said that they are trying to bring the MSF rate to normal, that is 1 percent between the repo and the MSF rate.
When this happens, we expect that the wholesale deposit rates will also come down, to that extent, there will be a cost reduction and that is what we are anticipating.
Q: Have the public sector banks been nudged by the government, by the finance ministry to announce these lending rate cuts this evening because that is the sense we are getting? There has been no clarity on capital infusion, how much each bank stands to get? We do have a figure of Rs 14000 crore but are banks obliging the finance ministry?
A: Not at all. Capital is a secondary issue. If there is no corporate credit picking up and if we have to increase our credit, you should always look for a safer credit which you can lend and today's market offers retail as the safest bet and that is why we have looked at it.
The finance minister had made a request and we have kept it in mind. But there is no question of somebody nudging us on this issue. It is very clearly a decision which is taken by our asset liability committee (ALCO).
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