Public sector lender Bank of Baroda on Tuesday cut its base rate by 25 bps to 10%, effective May 6.
BoB becomes the latest lender to cut the key rate 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.
SBI and HDFC Bank trimmed their base rates by 15 bps each to 9.85%; others like ICICI Bank and Axis Bank followed suit, lowering base rates by 25 bps and 20 bps, respectively.
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.
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