State-run lender Bank of India (BoI) has reduced its base rate — the benchmark rate to all loan rates linked — by 25 bps to 9.95 per cent. Bank of India is only the second public sector lender after State Bank of India to cut base rate after the Reserve Bank of India’s monetary policy review on 7 April.
The new rate will be effective from Monday.
While RBI has maintained status quo in its April review meeting but said further rate cut will happen once banks start the monetary transmission process. RBI started to change the rate cycle in January when it reduced the policy rate by 25 bps — which was the first rate cut since May 2013. The January rate cut was followed by another rate cut by similar amount in March. The repo rate is at 7.50 per cent. Only United Bank of India and Union Bank of India had reduced their base rate after the central bank’s rate cut.
Apart from SBI, private banks like ICICI Bank, HDFC Bank, Axis Bank have reduced base rate.
Bank of India’s decision to cut rate may trigger similar action by its peers like Bank of Baroda, Punjab National Bank, Canara Bank, IDBI Bank, among others.
*WEF 4 May, 2015