Bowing to the adversity of economic meltdown, the State-run Uco Bank is likely to cut its prime lending rate by 100 basis points with effect from Jan. 1.

Speaking at an interactive session on 'Global financial meltdown: impact on the Indian economy', organised by the Merchant’s Chamber of Commerce (MCC), Chairman and Managing Director, UCO Bank, Subodh Kumar Goel said, that while the bank's board would make the final decision on December 26, it proposed "to bring in a reduced interest rate regime on its lending and deposit rates from January 1, 2009."

Answering questions on the rates for deposits, Mr. Goel said that while a reduction was in order, the rates would move in tandem with the inflation rate, which has now been around 8 per cent. "It is time to reduce deposit rates and lending rates will follow that." He, however, said that lending rates could not be in the region of 2-3 per cent as was the trend overseas, since it was linked to inflation.  

Earlier in his address, he said that while the basic problems of cash and capital have been addressed by the Reserve Bank of India and the government, the biggest problem now was that of building confidence. Mr. Goel also advised the gathering to keep their inventories at minimal levels, cut costs and liquidate idle assets. He said the impact would be felt more by the smaller players. He also informed the gathering that his bank had set up a crisis-monitoring cell to liaise with the borrowers representing sensitive sectors.