Post reduction in savings rates, the Indian Banks may experience improved net interest margins by 15-18 bps. There is no formal indication of corresponding decrease in lending rates.
“PSBs, with a stable, large and granular savings deposit base, will have additional manoeuvrability over private peers to cut MCLR.The maximum cut in MCLR for PSBs can be 35 basis points. For private banks, the threshold is 25 basis points. This could intensify competition among large lenders with strong savings deposit franchise and capitalisation towards gaining credit market share,” Niyogi said.
SBI has 36 % savings deposits, and Punjab National Bank has 34 %. Private sector lenders such as ICICI (35 %), HDFC Bank and Axis (around 30 %) will also benefit from the competition.
“All banks with savings deposits of 30 per cent will benefit. But not everyone will pass it on to their borrowers. For example, SBI has already said that the merger of associate banks has led to 60 to 80 bps erosion in margins and hence they cannot lower lending rates. But lenders like HDFC Bank who wants to gain market share especially on the corporate lending side will be more aggressive in cutting lending rates,” said Asutosh Mishra, analyst at Reliance Securities.