While Allahabad Bank and UBI said that they would lower their benchmark prime lending rates (BPLRs) by 25 basis points, Uco Bank and OBC announced a reduction of 50 basis points.

Several other public sector lenders, including Bank of Baroda, Bank of India and Union Bank of India, have already announced similar measures effective April 1. While these banks were unlikely to cut their BPLRs further, other government banks might announce further rate cuts in the coming days.

RATE REMEDY
 Bank     Reduction
(in basis points)     BPLR
 (%)
BoB             50     12.00
BoI             50     12.00
Union Bank     50     12.00
Uco Bank     50     12.00
OBC             50     12.00
HDFC*             50     14.00
Allahabad Bank     25     12.25
UBI             25     12.25
* Retail prime lending rate effective March 25;
benchmark prime lending rate for others from April 1
Source: Banks

At the same time, Allahabad Bank also decided to realign deposit rates, while OBC was expected to take a call in the next few days.

In Delhi, Cabinet Secretary K M Chandrasekhar said private banks were not doing enough to cut interest rates. The banks which pared rates said that there were strong signals from RBI to reduce lending rates, particularity after the recent 50-basis-point reduction in the repo and reverse repo rates.

Since October, RBI has reduced repo rate by 400 basis points to 5 per cent, while reverse repo has been lowered by 250 basis points to 3.5 per cent. The cash reserve ratio has also been cut by 400 basis points to 5 per cent to inject Rs 1,60,000 crore into the system.

In recent weeks, the RBI and the government had prodded banks, especially foreign and private sector players, to lower lending rates as the cost of funds has also come down.

"When the RBI reduced the repo rate, which was a strong signal for reducing interest rates, we did not do so, mainly because we were waiting for the market situation to improve. Now there is sufficient liquidity and inflation is almost zero. So, we have decided to go in for a rate cut," said Allahabad Bank Chairman and Managing Director (CMD) K R Kamath.

"The bank had taken the decision to reduce interest rate a week ago on the back of improved liquidity," added Uco Bank CMD S K Goel.

"The decision to reduce interest rate is to align ourselves with market conditions, and the demand and supply of credit," said S C Gupta, UBI CMD.