According to officials, majority of banks have either announced new interest rates or are in the process to do so within a week or so. However, majority of them say that they are not immediately lowering lending rates as they are yet to be convinced that the current inflows of fresh deposits are sustainable. [break]
Some of the banks have already reduced the interest rates on call account -- an interest bearing account that bank allows to maintain to good current account customers. "The interest rate on call account was as high as 11 percent just two months back. But it has come down to 6-7 percent in recent weeks," the official said.
Prime Commercial Bank and Laxmi Bank have lowered interest rates on similar deposit to 10 percent from 10.25 percent and 10.50 percent respectively. Sources say Citizens Bank is also thinking in that direction.
Earlier, the central bank had reported that the banking industry attracted fresh deposits worth Rs 25 billion within a month after the commercial banks raised interest rates some five months ago to deal with the worst-ever liquidity shortage in the industry.
Though the banks have been able to lure adequate deposits after raising interest rates, the problem is that they do not have good projects on their hands to immediately make investments, the official said.
As a result of lingering shortage of liquidity that surfaced in the domestic economy front after October last year, banks have not entertained potential projects for investments.
The bankers, however, ruled out immediate possibility of lowering lending rates. Though liquidity situation has lately improved, revising lending rates will depend on how sustainable will be the flow of fresh deposits into the banking system, officials said.
According to a quick survey conducted by myrepublica.com, the banks that had offered the highest interest rates were able to attract huge deposits and they are the ones that are now in rush to lower the interest rates, the official said.
As a result of slow loan disbursements, the liquidity ratio of some of the commercial banks has crossed the desirable limit of around 24 percent. As per the central banks´ directives, all financial institutions are required to keep a minimum of 20 percent liquidity ratio.
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