BoB, Union Bank await policy review cues to decide on rate cut

Public sector lenders Bank of Baroda (BoB) and Union Bank of India today said they would take a call on slashing interest rates in specific segments once the RBI has announced its mid-term policy review.

"We will take a call after the RBI's policy review. At the moment, liquidity is tight and perhaps one will like to assess the overall situation before taking a decision [on slashing rates]," Chairman and Managing Director of Bank of Baroda MD Mallya said.

He was speaking on the sidelines of the fourth Annual Credit Information Conference organised by Credit Information Bureau (India) Ltd (CIBIL).

Mallya also said that unless the cost of raising resources came down, it would be difficult to pass on the benefits to end-users.

The chairman of Union Bank echoed similar sentiment.

"We will have a look at our Net Interest Margin [NIM]. If it improves substantially, we will look at [rate cut] in some of the products. Based on that, we will take a call," Chairman and Managing Director of Union Bank of India, MV Nair said.

Union Bank of India was the first bank to slash its base rate by 10 basis point to 10.65% after the policy review by the apex bank on December 16, 2011.

Referring to tight liquidity situation and expectation from upcoming mid-term review, Mallya said he was expecting some relaxation.

"Liquidity is by and large tight in the last few weeks. May be with the advance tax payout, liquidity will remain tight for sometime. Market expects a CRR [cash reserve ratio] cut..Let's see," Mallya said.

He, however, declined to speculate on the quantum of CRR cut likely to happen in the next policy review.

At present, banks are borrowing around Rs 1.5 lakh crore a day from the repo window, which is much above the comfort level of the central bank of around Rs 60,000 crore.

Source: Business Standard