The government has asked public sector banks to re-consider the hike in their prime lending rates or PLRs. CNBC-TV18 finds out which banks are likely to be impacted the most.
Most PSU banks raised their PLRs recently. But the Finance Minister has asked PSU banks to keep rate hikes in abeyance. The government has asked PSU banks to get board approval before hiking PLRs. PLR is the benchmark rate linked to all advances. Therefore, banks might have to roll back hikes that have been announced recently.
But a possible rollback of the rate hikes would impact the banks in more than one way. In the long run, this would hit their margins. In fact, analysts say banks with lower CDR, CA/SA would be hit the most.
Also, yield on advances would decline, along with a decline in return on assets. But due to cheaper loans, volume-led growth is likely, they add.
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