With the base rate being implemented over the next 2 months, all banks are ready to compute their base rate which would be eliminating the benchmark prime lending rate (BPLR) totally from the loan pricing system of Indian banks. The base rate is coming into effect from 1st July 2010.
But many of these banks follow competitive pricing and so would set their rates for the car loans in accordance with the rates announced by the SBI. They don’t want to lose their market share to SBI.
Abizer Diwanji, head (financial services), KPMG said, “SBI has a market share of 40-45% in the corporate lending market. They can possibly have the lowest base rate and can sweep away competition on pricing”.
Experts say other PSU banks would follow the rate fixed by the SBI and private sector banks would be improving their cost efficiencies in order to vie in the market.
B A Prabhakar, executive director, Bank of India said, “We are more comfortable with the 1-year fixed deposit cost as the yardstick to calculate the base rate”. The bank has announced that its base rate would be more than 8%.
A top official of Central Bank of India said, “That will be sensible as usually most of the deposits fall in that tenure. Otherwise it may lead to an asset-liability mismatch”.