Led by State Bank of India (SBI), five more banks today cut interest rates on loans and deposits up to 1%, following reduction in the short-term policy rates by Reserve Bank last week.
While banks have tweaked rates differently, the net effect is that depositors lose more than the gains accruing to borrowers resulting in widening of the banks' margins.
The largest lender of the country's SBI slashed interest rates up to 1% on fixed deposits of all but one maturity.
With these changes, the peak rate on SBI fixed deposits would come down to 9% a year, from tomorrow.
On the other hand, it has reduced interest rates marginally by about 0.25%, that too only on car loans.
SBI Chairman Pratip Chaudhuri said that the bank may not go in for cut in the minimum (base) lending rate. "Our base rate is already one of the lowest in the industry," he said.
Other banks, including Allahabad Bank, United Bank of India and Kotak Mahindra Bank have reduced the base rate by up to 0.25%.
SBI's base rate stands at 10%. It is the benchmark rate below which a bank cannot lend.
Lakshmi Vilas Bank reduced its FD rates on select maturities by 0.25%.
Following the RBI's decision to cut key interest rate by 0.5% to 8% in its annual credit policy ICICI Bank, IDBI Bank and Punjab National Bank have already announced reduction in both lending and deposit rates.