NIM of banks to remain unaffected by base rate; rates on personal loans may not rise

By | June 10, 2010

With the arrival of base rate from 1st July  2010 banks are expected to increase lending rates on Personal Loans. But it looks unlikely that base rate would also impact the net interest margins (NIMs) of banks.

Bankers say that even if lending rates are increased on certain loans, they have to be kept low on other loans. So the overall yield would be more or less steady.

SS Rajnan, chief financial officer, State Bank of India said, there won’t be any impact on the bank’s NIM as the yield from lending would be constant. He added, “I do expect the commercial paper market to get a boost due to the base rate as short-term borrowers will shift to that market. I don’t think any kind of hurdles from legal or technology fronts will affect us while migrating to the new lending rate regime”.

K R Kamath, CMD, Punjab National Bank also had the same opinion. He said, “Rather, I think that our job would then be to protect our NIM.

But S Sridhar, CMD, Central Bank of India, differed on the topic. He anticipates an increase in the bank’s lending rate with the arrival of base rate and thinks this would positively affect the banks’ NIM.

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