Industrial Credit and Investment Corporation of India Bank cuts loan rates, Public Sector Banks are next

Even as public sector banks gear up to announce further rate cuts by next week, the country’s second-largest lender, ICICI Bank, on Thursday announced a 0.50% reduction in both retail and corporate rates. All existing floating-rate retail loan customers will benefit from the reduction. This is the third time the bank has pared its rates in the last six months. Explaining the decision, a bank spokesperson said, “Our cost of funds has fallen.”

ICICI Bank’s new floating reference rate is applicable to all floating-rate retail loans (including home loans) and will come into effect from Friday. The revised FRR stands at 12.75% pa, against 13.25% pa at present. The bank also announced a 0.50% reduction in its benchmark advance rate to 15.75% pa.

However, ICICI Bank has ruled out any more rate cuts in the immediate future. “We would not follow public sector banks in cutting our rates further,” the spokesperson said.

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Reserve Bank of India cuts short-term rates

The Reserve Bank of India has acknowledged that GDP growth for 2009-10 would be a disappointing 6% unless banks substantially increase their lending to industry and the retail sector. For this, banks need to reduce interest rates on loans, it said.

In RBI’s annual policy statement announced on Tuesday, governor D Subbarao therefore slashed by 25 basis points the repo (the rate at which banks borrow from RBI) to 4.75% and reverse repo (the rate at which they park funds with RBI) to 3.25% with immediate effect.

However, even though the country’s second-largest bank, ICICI Bank, responded by lowering its floating reference rate by 50 basis points to 13.25 % from Wednesday

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Kochhar set to succeed Kamath at ICICI Bank

The country’s second largest bank, ICICI Bank, is poised to see a change of guard after 12 years. The bank’s board is slated to meet on Friday to name the joint managing director & chief financial officer, Chanda Kochhar, as the successor to KV Kamath.

In turn, 62-year-old Kamath, who is now managing director & chief executive officer, will be appointed as the non-executive chairman of the bank.

The bank, which has been looking for a successor to Kamath for a year now has finally closed in on Kochhar, as Shikha Sharma, another contender for the top post and currently chief executive officer & managing director of ICICI Prudential Life Insurance, has opted out of the race.

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Global meltdown affects banks in Bric nations

Banks globally have found their bottoms ripped off by the global meltdown Bank in emerging economies have have also suffered. It has, in fact, been an eye-opener for these countries’ banking fraternity.

ICICI whose market capitalisation fell by8.6% and HDFC Bank,which fell by 6%, were among those Indian firms listed on American bourses that incurred loss to the tune of $10 billion during the past one week alone. Now the most important lesson to be learnt for the Bric countries’ banking community is be conservative in that follow strict rules while disbursing sub-prime loans and have thorough due diligence before finalising the loans. Another message for these countries from the US credit crunch may be to go aggressively for mutual cooperation.

Yet another major positive development for highly populous countries like India and China can be focus more attention to the domestic consumerism and generate more employment to their skilled youth which is coming up in the form of demographic dividend.

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Sensex plunges 506 points: rupee breaches 47 a dollar

The rupee slipped below 47 to a dollar-a two-year low and the BSE Sensex plunged to its lowest level in two months, closing out at 12,595.75, as Indian markets fell in tandem with their Asian and European peers on Monday. FIIs pulled out $149.8 million in equities from domestic markets.

Real estate and banking stocks led the rout with ICICI Bank dropping 12% to its lowest in more than two years. IT stocks also plunged on fears that the global financial crisis will reduce software spends.

The Sensex fell 506.43 points, or 3.9%, to 12,595.75, the steepest since July 29. All but one of the 30 stocks in the benchmark index declined as it touched a one and a half year low of 12,402.84 points during the session.The S&P CNX Nifty of the NSE slid 135.20 points, or 3.4%,to 3,850.05.

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Finance Minister: subprime crisis to hit India

Finance Minister P Chidambaram on Monday said the fallout of the subprime crisis on the global credit and housing markets would impact India.

"When crisis (has) moved from the subprime mortgage market to the housing market, and now the housing market to the credit market, there is impact upon India. There is impact in terms of credit flows and financial flows. But at the moment, I believe that impact is second-order impact and a moderate impact," he said.

Turmoil in the global financial currency markets has started affecting Indian companies and the stock market. While ICICI Bank has lost as much as $264 million up until January due to its exposure in the overseas credit derivatives mar kets, other banks are also facing significant losses.

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