Money & Banking

Taking RBI's cue, banks cut deposit, lending rates

| | Updated on: Apr 19, 2012
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Home, auto loans will become cheaper soon

Good news comes to borrowers earlier than expected. Banks have started cutting lending rates following the repo rate cut by the Reserve Bank of India. On Tuesday, after the RBI action, banks did not seem raring to take the cue, but they now appear to be giving in to government and RBI pressure.

The RBI had cut the interest rate at which banks borrow funds from it (the repo rate) by 50 basis points to 8 per cent. This cut is now getting transmitted in the form of banks' reducing their interest rates. The move will result in lower home, education and auto loans rates for existing and new customers. Simultaneously, banks are also cutting deposit rates.

ICICI Bank

ICICI Bank cut interest rates on retail fixed deposits for various tenors by 25 basis points on Thursday. India's largest private sector bank also pared its lending rate benchmark — the Base Rate — by 25 basis points. Both the rate cuts come into effect from April 23. The revised Base Rate will be 9.75 per cent against 10 per cent now.

The bank also announced a reduction of 25 basis points in its benchmark prime lending rate (BPLR) to 18.50 per cent from 18.75 per cent and in its Floating Reference Rate (FRR) for consumer loans (including home loans) to 15.50 per cent from 15.75 per cent. BPLR and FRR are used for determining interest rates on loans and advances sanctioned up to June 30, 2010. The bank, in a statement, said fixed rate customers will not be impacted by the above reduction and their contracted rates will remain unchanged.

Ms. Chanda Kochhar, Managing Director and CEO, said: “With the easing of systemic liquidity, we have already seen some correction in wholesale deposit rates. We expect the cost of funds to gradually come down and this reduction in the lending rates is a proactive move by us to pass on the benefit to our valued customers.”

Punjab National Bank

Punjab National Bank has reduced the interest rate on term deposits (of less than Rs 1 crore) by 25 to 50 basis points in select maturity buckets. The public sector bank has also cut its base rate by 25 basis points to 10.50 per cent. The deposits and lending rate cuts are effective from May 1.

Bank of Maharashtra

Bank of Maharashtra has decided to reduce its Base Rate by 10 basis points from 10.60 per cent to 10.50 per cent, with effect from May 01, 2012. On Wednesday, IDBI Bank cut retail term deposit rates by 10-50 basis points. It has also pared lending rate benchmarks — base rate and benchmark private lending rate — by 25 basis points.

Following the cut, IDBI bank's the new base rate is 10.50 per cent and the BPLR is 15 per cent. The public sector bank is the first bank to cut interest rates following the repo rate cut by the RBI.

Published on November 17, 2017

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