After state-run banks, their private counterparts on Wednesday assured the finance ministry to consider cut in interest rates in a fortnight, which could lead to softening of home, personal and corporate loan rates.
"They (heads of private, including foreign banks) have assured that they would seriously examine reduction of interest rates," finance secretary Arun Ramanathan told reporters after meeting the representatives of private and foreign banks.
Finance ministry sources said private bankers are expected to revise interest rates within a fortnight.
Ramanathan said he could not predict what would these banks do, but the banks representatives said they would examine rate cuts because RBI has given clear signal.
RBI has injected more than Rs 2,60,000 crore (Rs 2,600 billion) into the system through a series of cuts in reserve ratio and short term lending rate, repo.
Country's largest private sector lender ICICI Bank joint managing director Chanda Kochhar said consensus at the meeting was that it is in the interest of the economy to have lower interest rates.
"But we will have to see how situation moves before we take a decision. We continue to review it on daily basis," she said.
The meeting came a day after Finance Minister P Chidambaram held a review meeting with PSU banks, most of which promised to cut benchmark lending rates by up to 75 basis points.
In fact, Syndicate Bank and State Bank of Bikaner and Jaipur on Tuesday announced a 75 per cent reduction in prime
lending rates.
Federal Bank managing director and CEO M Venugopalan said his bank may cut interest rates by up to 50 basis points, but it is entirely up to its Asset Liability Committee to take a call on the matter.
Though there is no decision, each bank will be taking a call on the issue in the next one or two weeks, he said.
Banks representatives also told the finance ministry officials that liquidity is comfortable at the moment, but there is need to continuously monitor it, Ramanathan said.
Asked whether banks representatives wanted further RBI measures to improve liquidity, he said, "They were quite happy with the cuts (in CRR, SLR and repo rate) by RBI.
They said we have to continuously watch for liquidity, they did not call for any particular specific measures further."
HDFC Bank managing director Aditya Puri said liquidity situation has improved after series of measures taken by RBI.
Venugaopalan said things are improving liquidity wise.
Ramanathan said banks have assured that they would continue to support the existing lines of credit to small and medium enterprises, non-banking finance companies and mutual funds.
To a query on augmenting dollar liquidity, the finance secretary said banks representatives has told forex lines of credit were necessary for the branches abroad.
Besides, RBI deputy governor V Leeladhar, J&K Bank chief Haseeb A Drabu, Axis Bank head P J Nayak, representatives of HSBC, Citigroup, Duetsche Bank and officials of the finance ministry attended the meeting.
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