Oriental Bank of Commerce (OBC) is not looking at any base rate cut for now, it’s Chairman & Managing Director S.L. Bansal has said.
However, in what could prepare the ground for a base rate cut in the coming days, OBC has reduced the interest rate on bulk deposits for a maturity period of 180 days to less than two years.
The interest rate on such bulk deposits has been lowered to 9 per cent from 9.25 per cent with effect from Tuesday.
"There is no immediate plan to lower our base rate. Our cost of funds has not come down significantly even after RBI’s Monday announcement,” Bansal told
OBC’s base rate is currently pegged at 10.25 per cent. The base rate is the interest rate below which a bank cannot lend.
For OBC to lower its base rate, it is imperative that the cost of deposits comes down. The latest move to trim certain bulk deposit rates is a step in that direction.
Besides reducing the interest rate on the Marginal Standing Facility (MSF), the RBI on Monday provided additional liquidity to banks through term repos of seven days and 14 days for a notified amount equivalent to 0.25 per cent net demand and time liabilities of the banking system.
The provision of additional liquidity in the form of term repos has encouraged OBC to go in for an interest rate cut in bulk deposits, it is learnt.
Bansal also pointed out that the current MSF interest rate of 9 per cent was still higher than the 8.25 per cent level of mid-July.
“In mid-July our base rate was at 10.25 per cent when MSF was 8.25 per cent. Now, even though MSF has been brought to 9 per cent, it is still higher than the earlier level of 8.25 per cent,” he said, indicating there was little room to cut the base rate now.
At noon, OBC equity shares were up 2.69 per cent at Rs 156.75 per share at the National Stock Exchange.