Citibank: A 50 basis points cut in the interest rates may come soon
By Vaibhav Aggarwal
Jan 5, 2009
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The recent measures by the Reserve Bank of India have induced most Indian banks to cut interest rates, following which the foreign leader, Citibank has also decided to reduce the interest rates.

The bank is likely to cut both its deposit and lending rates in the coming days. A top official from the bank informed that Citi is planning to cut deposit rates by up to 0.5%. Also the prime lending rate (PLR) of the bank is likely to be reduced by the same percentage. "We may look at an upto 0.5 percent reduction in our deposit rates across different tenures. With the cost of funds in the banking system coming down, there is a clear downward pressure on interest rates," said the official.

The official further said that, "Once the deposit rates are lowered, there is an increased scope for effecting a reduction in our lending rates."

Last time Citibank had reduced its PLR in November 2008 by 75 basis points to 15%.

This move by the foreign lender also seems to take indication from RBI's recent cut in the key policy rates. After the announcement of policy cut by the RBI many banks including the industry leaders, State Bank of India (SBI) and ICICI Bank have cut their lending as well as deposit rates with effect from the New Year.

In its latest move, RBI had cut the repo rate to 6.5% and reverse repo to 5%. Since October, the apex regulator had also reduced the cash reserve ratio (CRR) by 350 basis points to 5.5%. RBI is also expected to announce yet another cut in its policy rates in the coming days to enhance the liquidity in the system.


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