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Journalism of Courage
MUMBAI, June 26: Term lending institutions are all set to cut their prime lending rates (PLR) in the wake of the one percentage point slash in bank rate on Wednesday.
All the three institutions earlier reduced the PLR to 15 per cent in May. While ICICI and IDBI slashed their PLRs by 1.50 percentage points to lower their PLRs to 15 per cent, IFCI cut it by one percentage point at 16 per cent. The decision was in response to the Reserve Bank of India’s liberal slack season credit policy.
The IFCI board which met on Thursday to finalise the results also discussed the impact of the decision of the RBI to reduce the bank rates. However, since the RBI’s bank rate slashed was announced on Wednesday, the issue was not on the agenda of the meeting, the board did not take a final view on the subject.
Consequent to the decision of the RBI, Agarwal felt that it should be possible for the financial institutions to reduce their PLR with the same margin. As far as IFCI was concerned, he said, the decision to lower the PLR would have to be taken by the board sometime later.
He further added, "in the institutions we felt that the rates have to come down." His argument was that the reduced bank rate would have a favourable impact on the cost of funds which would prompt reduction of lending rates.
Agarawal also said that the short-term rates have already come down. The IFCI, he added, recently effected private placement of bonds at the rate of 12 per cent for one-year period, 12.5 per cent for two-year period and 13 per cent for three-year period.
The IDBI is expected to cut its PLR by at least 50 basis points when its board meets on Monday. The financial institution is in the process of working out the impact that a cut in its PLR could have on the institution’s bottomline.
