IN year 2009, most banks reduced the loan rate for almost all their loan products. The only exception was the credit card rates, which went up. Most private and foreign banks also witnessed reduction in loans to individuals and risky corporate accounts.

Reduction in loans portfolio Teams selling unsecured individual loans like personal loans and credit cards were disbanded in large scale in many private and foreign banks. The same was true for NBFCs selling personal loans. Sales teams in automobile showrooms (both two wheelers and four wheelers) vanished overnight after the full effect of the global financial crisis was felt in January ‘09. Banks objective was to reduce the overall risk in their loan portfolio.

Government intervention

At the peak of the financial crisis was so heavy that banks were hesitant to event park their cash in the money market - this lead to the overnight rates touching a high of 20 per cent. It called for Government intervention in the form of assurance of the banks’ stability to reduce the rate in the money market. The Reserve Bank of India on its part reduced the CRR and SLR rates to increase the liquidity in the market. Lending rates down There has been an across the board reduction in the prime lending rates for all types of banks. RBI has published the following data with respect to the lending rates.

Source: wealth.moneycontrol.com