Interest rates on bank loans are now to cut down by 0.5% to 0.75%. This announcement was made by the public sector banks that are also likely to reduce the interest they pay on deposits by about 0.5%. This is to ensure that the profitability of the banks is not flooded out.
Banks like State Bank of India, Bank of Baroda, UCO Bank, and Central Banks agreed to cut down the rates so that they can easily lend their credit-worthy customers a loan at a lower prime lending rate (PLR). Punjab National Bank and Union Bank have already cut down the rates and others are waiting for the final announcement by the Asset and Liability Committee.
Reserve Bank of India (RBI) is also having a closer look at the liquidity condition confronted as a result of global economic recession. The bank is also taking possible measures to infuse liquidity in the system and enhance the availability of funds.
Even the largest private sector bank, ICICI Bank, agrees to review the loan lending rates after visualizing the measures taken by RBI to inject liquidity.
Revision of the interest rates and a cut in the PLR will definitely be a great support to the Indian car industry as this will make the car loans cheaper.