The Reserve Bank of India's (RBI) move on Tuesday to cut key rates for the first time in three years by a sharp 50 basis points will provide the much needed respite to consumers as top banks said interest rates would go down, but not too soon.
"Of course, the rate cuts will be passed on," said Pratip Chaudhuri, chairman, State Bank of India.
"Let me admit, after the last CRR (Cash Reserve Ratio) cut of 75 basis point also the transmission has not happened fully because that came in the month of March. So, we were just slightly watchful of the liquidity situation," he said, adding that SBI might do a comprehensive cut but not across the board but in particular segments.
"Largely in our case it would be for SMEs but it is for our asset liability committee which will be meeting today (Tuesday) evening and soon thereafter to take a call," he said.
Chanda Kochhar, managing director and chief executive officer of ICICI Bank, said the reduction in the interest rates would be across deposits as well as lending rates.
"Clearly it will have to be across both, deposits and lending rates and in fact the deposit rate decrease is absolutely required because otherwise the costs of funds for the banks would not go down."
HDFC Bank Managing Director Aditya Puri said both deposits and lending rates will come down "but it would probably take a while because after all the banks will only bring it down when you ask a question on the base rate, the base rate depends on the function of cost.
The RBI decision would result in interest rates falling on housing, automobile and commercial loans.
Currently, the base rates of these banks range from 10 to 12 per cent while they offer loans such as home loan at an interest rate between 10.75 per cent and 14 per cent and auto loans between 12 and 15 per cent.