Reserve Bank of India is continuously cutting interest rates. Motive to provide cheap loans to people in Corona crisis. But private sector banks have not lived up to this campaign. However, the government banks have definitely given some relief as per RBI’s intention.
Private banks have not reduced the interest rates for the common people as much as the RBI did. In comparison, PSU banks of the country tried to bring the full benefit of the rate cut by the Reserve Bank to the common people. That is, government banks can prove to be a better option than private banks in the country for taking loans.
Relief of only 22 basis points instead of 115 basis points In the last one year, the Reserve Bank of India (RBI) reduced the policy rates by 115 basis points. In comparison, private sector Axis Bank, ICICI Bank, Federal Bank and DCB have given relief of only 22 basis points to customers on new loans. At the same time, the state banks of India (SBI), Indian Overseas Bank (IOB), cut the interest rates for the common people by 120 basis points. This information has been obtained from the data of the Reserve Bank of India (RBI), the banking regulator of India.
Basis point has such effect on interest rate
A basis point means 0.01 percentage point. This means that if the RBI has reduced by 115 basis points, then the interest rate should be cut by 1.15 percent.
Private banks increased profits due to expensive lending
The profitability of private sector banks has increased due to the Reserve Bank of India (RBI) not extending the full benefit of the reduction in interest rates to the customers. In comparison, the profits of public sector banks (psu bank) have been weak. Also, the truth is that the profit margins of private sector banks have been affected due to unsecured debt and high yield retail.