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In an interview to CNBC-TV18, Bansal adds that the decision to cut base rates will be reviewed after a seven or eight days and says that the bank's liquidity is at comfortable levels.
Below is an edited transcript of the interview on CNBC-TV18
Q: Can you explain why the Oriental Bank of Commerce (OBC) has deferred the decision to effect a cut of 25 bps in its base rate ?
A: Despite our announcement on July 10 to cut our base rate with effect from July 22, the decision was deferred due to changes in short-term rates caused by market volatility. The decision will be reviewed after seven or eight days.
Q: Do you think some of these rates, including deposit rates and maturities will move higher?
A: Not yet. To date, liquidity is at comfortable levels as far as Oriental Bank of Commerce is concerned and fortunately, there is not much credit offtake. So, I don't foresee any requirement for raising deposit rates.
Q: Is the economy in for lower rates going forward?
A: The situation is fluid. The RBI has promised that its measures were only temporary till stability returns.
Q: Have your costs gone up because of RBI's measures over the last few days?
A: Costs have not gone up and the measures that we are implementing are purely precautionary in nature. After the RBI's announcements three days ago, CD rates suddenly moved from 8.5 to 10 percent to settle at the current level of around 9.25 percent. So, we are constantly monitoring the situation.
Q: Will you reconsider your decision to cut the deposit rates, on very high deposits, which amounted to over Rs 5 crore?
A: This cut of Rs 5 crore and above in deposit rates is part of a regular process that is reviewed daily. The planned 25-bps cut does not affect costs much and is move purely to manage liquidity
Q: Do you expect call rates to stabilise around 9 percent?
A: It depends on how long the RBI's current measures will be in force. If the measures are in force for a few months, the call rates will stabilise at 9 percent. If market volatility and the rupee stabilise, the RBI will bring these measures to a halt and then call rates will naturally fall.
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