While PNB’s rate cut will be effective from May 7, IDBI Bank’s will come into force from May 11. IDBI Bank has also decided to reduce the retail term deposit rates in select buckets by 10 to 25 bps with effect from May 11.
The announcement comes a day after public sector lender Bank of Baroda cut its base rate by 25 bps to 10%, effective May 6.
A series of rate cuts have come after RBI governor Raghuram Rajan expressed concern over lack of transmission. Since January 2015, RBI has cut the repo rate twice by 25 bps each, bringing it down to 7.5%.
However, banks had shied away from cutting base rates, saying they would wait for credit demand to pick up before taking any action. United Bank and Union Bank of India were exceptions, having reduced their base rates by 25 bps each after the first RBI rate cut in January.
After Rajan’s expression of discontent at the April 7 monetary policy where the central bank maintained status quo on key rates, all lenders started reducing their base rates.
Kotak Mahindra Bank trimmed its lending rate by 15 bps to 9.85%; State Bank of Mysore cut its rate by 25 bps to 10% and Bank of India lowered it by 25 bps to 9.95%.
Although bankers are still of the view that credit growth will take some quarters to see any significant pick-up, they believe that cheaper options of raising funds from the bond market have also hurt corporate credit growth.
Meanwhile, State Bank of Bikaner & Jaipur on Tuesday cut its base rate by 15 bps to 10.10%.