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United Bank of India (UBI) became the first bank to announce a reduction in base rate following the Reserve Bank of India's (RBI) decision to cut repo rate by 25 basis points early Thursday.
"We have reduced our base rate by 25 basis points to 10%. The rate cut is effective from February 1," P Srinivas, managing director and chief executive officer of the bank, told Business Standard.
He added that the bank has no immediate plans to revise its deposit rates as it was offering one of the lowest deposit rates in the industry. "Most banks are offering 8.75%, while we are giving 8.5% (on one-year retail term deposit). So, for now we will not cut our deposit rates," Srinivas said.
RBI Governor Raghuram Rajan took markets and corporate India by surprise early morning today when he announced a long-awaited cut in the repo rate by 25 basis points to 7.75% with immediate effect. One basis point is one-hundredth of a percentage point.
This is the first repo rate cut since May 2013. The cash reserve ratio (CRR) has been kept unchanged at 4% of net demand and time liabilities (NDTL) while the reverse repo rate stands adjusted to 6.75%.
"It was certainly a surprise as bankers were expecting RBI to cut repo rate only in February. We don't think RBI will cut repo rate again before the budget," Srinivas said.
