A day after the Reserve Bank of India (RBI) slashed its key repo rate by 50 basis points, five State-run lenders such as Punjab National Bank, Bank of Baroda, Oriental Bank of Commerce, UCO Bank and IDBI Bank have trimmed their base or minimum lending rates by up to 0.40 per cent in response to RBI’s policy rate cut. Meanwhile, a private bank Axis Bank also has joined the race in order to encourage the loan growth in the banking sector.
A banking source, however, said that other lenders would also follow suit by this week-end. “We have not seen the projected credit offtake as of now. With the RBI’s move, the credit growth is likely to pick up going forward. We hope, others will follow soon,” said an Executive Director of a public sector bank.
“While the base rate cut so far has come mostly from public sector lenders except Axis Bank, other private peers are expected to follow suit soon,” he said.
Punjab National Bank (PNB) cut the base rate by 0.40 per cent, Bank of Baroda (BoB) by 0.25 per cent, Oriental Bank of Commerce (OBC) by 0.20 per cent, UCO Bank by 0.25 per cent, while IDBI Bank slashed the base rate by 0.25 per cent.
“Base rate cut by 40 bps from 10 per cent to 9.60 per cent from October 1,” PNB said in a statement. In a BSE filing BoB also said it has decided to reduce base rate by 25 basis points from 9.90 per cent per annum to 9.65 per cent. It also reduced the Benchmark Prime lending Rate (BPlR) by 25 basis points (or 0.25 per cent) from 14.15 per cent to 13.90 per cent.
The reduction in both the rates will be effective from October 5, the lender added. “Oriental Bank of Commerce has slashed its base rate by 20 basis points from 9.90 per cent per annum to 9.70 per cent with effect from September 30, 2015,” it said in a filing.
State-run IDBI Bank on Wednesday also cut its base rate by 0.25 per cent to 9.75 per cent. The new base rate will be effective from October 5. “The reduction in interest rate is expected to positively encourage loan growth, both in the retail consumer segment, as also revitalise fixed capital formation through higher corporate sector lending, thereby supporting the growth impulses in the economy,” the bank said in a statement.
UCO Bank on Wednesday also cut its base rate by 25 bps, claiming that it has become one among the few banks who have cut their base rates. “The bank’s current base rate is at 9.70 per cent,” a senior official of UCO Bank said.
Earlier on Wednesday, Axis Bank -- first among private lenders after RBI’s policy announcement on Tuesday -- announced a cut of 0.35 per cent in base rate to 9.50 per cent.
The base rate is the minimum rate of interest at which a bank can lend to its borrowers. Country’s largest lender State Bank of India, Andhra Bank and Bank of India were among the first to cut base rate yesterday in the range of 0.20-0.40 per cent in response to RBI’s repo rate cut of 50 basis points to 6.75 per cent.