Two days after the Reserve Bank of India (RBI) reduced the repo rate by 50 basis points (bps), several banks have joined the queue to reduce their base rate. Base rate is the benchmark to which all lending rates are linked. Most banks have reduced the base rate by 25-30 bps, barring some like State Bank of India (SBI) and ICICI Bank, which have slashed the base rate by 40bps and 35 bps, respectively. At present, SBI continues to have the lowest base rate at 9.30 per cent, followed by ICICI Bank and HDFC Bank at 9.35 per cent. The revised rate of 9.35 will be effective October 5, ICICI Bank said in a statement.
With the reduction, all loans linked to the base rate would be cheaper by at least 0.35 per cent. Another private sector lender, Kotak Mahindra Bank, reduced its base rate by 0.25 per cent to 9.50 per cent. "The base rate cut has been possible on revisions in the deposit offerings in recent past and the bank will also be cutting its deposit rates marginally," Kotak Mahindra Bank President and Group Chief Financial Officer Jaimin Bhat said. The other two private sector lenders, YES Bank and Karnataka Bank, have their cut base rate by 0.25 per cent to 10.25 per cent from 10.50 per cent effective October 5. "The reduction in base rate will make loans cheaper. The revised base rate will be applicable to new as well as existing loans," Karnataka Bank said in a statement. Besides, four public sector lenders - Allahabad Bank, Dena Bank, Bank of Maharashtra and State Bank of Bikaner and Jaipur (SSBJ) - reduced their base rate by up to 0.30 per cent. After the reduction, the base rate of Dena Bank and Bank of Maharashtra will be 9.70 per cent from 10 per cent while the new rate for SBBJ and Allahabad Bank will be 9.70 per cent, effective October 5. Meanwhile, Punjab National Bank also reduced its interest rate on fixed deposits on various maturities by 0.25 per cent. RBI had reduced the repo rate by a total of 125 bps in 2015 but banks had cut base rate by only 35-70 bps till now. The regulator, on several occasions, has pointed out that the rate cut transmission by banks hadn't kept pace.