Punjab National Bank—the country’s second-largest public-sector bank, in a statement, said it would not cut the retail lending rates further until the cost of funds came down.
K R Kamath, chairman and managing director, PNB said, “We have already cut our retail rates even before the RBI policy as we wanted to build up on our retail portfolio.” The bank’s current home loan rates stand at 10.75 per cent for loans up to Rs 75 lakh and 11 per cent for loans above 75 lakhs.
“Cost of lending is a function of cost of funds, and, with the deposit growth already slowing down, how will we be able to attract the depositors if we further cut the rates,” Kamath added. According to the latest RBI data, deposit growth was 14.3 per cent, which is below the central bank’s projection of 16 per cent for this financial year.
Few banks recently cut their retail rates including the country’s largest lender State Bank of India and Central Bank of India. SBI is charging an interest rate of 10.25 per cent for loans up to Rs 30 lakh and 10.4 per cent for loans above Rs 30 lakh while Central Bank of India is offering home loans below Rs 30 lakh at the base rate which stands at 10.5 per cent.
On bulk deposits, Kamath said the bank will look to replace the bulk deposits by retail deposits.
“If you want to reduce the cost of funds, you need to replace it (bulk deposits) by retail deposits”, Kamath added. A recent Deutsche Bank report said it expects PNB to shed about 5-7 per cent of its bulk deposits. Kamath also said the base rate will be reduced only when the cost of funds come down which, according to kamath, is not currently happening.
When asked if PNB is looking to launch the floating-rate term-deposit product like IDBI Bank, Kamath said, no such move is being contemplated at the moment. “When market conditions allow us, we’ll do that,” said Kamath. Meanwhile PNB inaugurated its ‘Pragati’ branches here. These have self-service area for customers with an ATM, cheque depositing machine, cash depositing machine and a pass book printer.