MUMBAI: Private banks reduced their weighted average lending rates (WALRs) on rupee loans more than state-owned banks did in the current fiscal year (FY22) through November (Apr-Nov '21).
While private banks cut the WALR on outstanding loans by 31 basis points (0.3%), PSU banks cut the same by just 12 bps (0.12%) on outstanding loans during Apr-Nov 2021.
On fresh rupee loans, private banks lowered the WALR by 15 bps against an 8 bps increase by PSU banks.
While the RBI cut the repo rate -- the rate at which it lends to banks -- by 250 basis points to 4% since the beginning of the pandemic, there was no cut in the current fiscal.
This must have driven private banks to cut lending rates more so as to prop up their loan books in the current fiscal, feels Madan Sabnavis, chief economist, Bank of Baroda.
"State-owned banks, on the other hand, might have been under pressure to contain their relatively higher proportion of bad loans and so cut rates by a lesser extent on outstanding loans," he surmised.
However, in the overall easing cycle (Feb 2019 -Nov 2021), PSU banks have outperformed their private-sector peers in monetary policy transmission to individuals and businesses.
During this period, PSU banks cut the average lending rate on outstanding loans by 135 bps against private banks' 123 bps cut during Feb 2019-Nov 2021. On fresh loans, the cut by the former was also more at 210 bps against 177 bps by the private banks.