In its policy review last week, the RBI indicated that it will soon come out with the final guidelines for calculating base rates under the new marginal cost of funds method. Leading banks, such as ICICI Bank, SBI and PNB, lost 1-3 per cent on Wednesday as the move would put margins under pressure.
While it is difficult to gauge the full impact, the net interest margin of banks with a higher proportion of floating rate loans will be affected more than that of banks with higher fixed rate loans. PSBs have a higher share of floating rate loans and are likely to see 7-10 basis points impact on their margins.
Private banks, have a higher share of retail loans. Since all non-mortgage retail loans are fixed rate loans, margin pressure is likely to be minimal at 3-5 basis points.
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