Four public sector banks have so far responded to finance minister P Chidambaram?s call to lower lending rates. Public sector lender Oriental Bank of Commerce (OBC) was the latest bank to cut base rate by 25 basis points (bps) to 10% on Tuesday, following similar move by Union Bank of India, Canara Bank and Bank of India (BoI).
Union Bank and BoI cut their base rates by 25 bps to 10%, while Canara Bank reduced its base rate by 30 bps to 9.95%. Base rate is the benchmark lending rate below which banks cannot lend. Oriental Bank of Commerce?s revised interest rate will be effective from July 22, the bank said in a notice to the BSE.
Other banks, like Bank of Baroda (BoB) and Central Bank of India, will also assess the scope to cut lending rates further.
BoB?s asset and liabilities committee (Alco) is expected to meet before the end of July, while Central Bank of India will take a rate decisions only in a couple of weeks, according to senior officials at the bank.
On June 3, the finance minister had asked banks to consider reducing lending rates to stimulate credit growth. Chidambaram had said the base rate of State Bank of India is 9.7%, while the average of the base rate of other banks is still 10.2% or 10.25%. He highlighted the Reserve Bank of India (RBI) had cut its policy rates by 125 bps and some part of this must be passed on to the borrowers.
However, the nation?s largest lender State Bank of India has declined to reduce rates any further, since its base rate currently stands 9.7% which is the lowest among all public sector banks.