State Bank of Travancore (SBT) today became the first bank to cut benchmark lending rate, or base rate, by 0.1 per cent to 10.15 per cent, almost a week after RBI slashed policy rate by 0.25 per cent.
“The revised base rate will be 10.15 per cent and the benchmark prime lending rate will be 15.15 per cent.
“At present, the rates are 10.25 per cent and 15.25 per cent, respectively,” SBT said in a filing to the BSE.
The new rates will be applicable from March 16, 2015, it added.
Last week, the Reserve Bank had lowered the key repo rate — at which it lends to banks — by 0.25 per cent to 7.5 per cent.
It was the second surprise and out-of-policy rate cut, after a similar slash in repo rate to 7.75 per cent in mid-January.
There has been a constant pressure from industry and other stakeholders on the central bank to cut repo rate so as to spur the investment cycle.
However, banks have not been very keen to pass on the benefit and only a few of them slashed their interest rates after RBI’s move in January.
India is witnessing an avalanche of capital flows as central banks around the world are reducing interest rates to very low levels but the RBI is unable to cut interest rates very quickly due to high inflation, Governor Raghuram Rajan had said after cutting the repo rate.
Also, RBI in an agreement with the government recently, has committed to use monetary tools to cut inflation to pre-decided levels.
The Monetary Policy Framework Agreement binds Reserve Bank of India (RBI) to use monetary policy tools, including fixation of interest rates, to bring down inflation to less than 6 per cent by January 2016 and to around 4 per cent by March next year. PTI KPM DP STS 03091354