Mumbai: Public sector United Bank of India (UBI) has announced a 25 basis point reduction in its lending rates to all advances linked to the prime lending rate (PLR), with immediate effect.

The country's largest private sector lender, ICICI Bank also said it will soon review lending rates following a cut in the Reserve Bank's short-term lending rates.

A UBI report said the reduction in lending rates would be applicable to all loans, including education, housing and small and medium enterprises, and that the reduction had been made keeping in view of the recent liquidity infusion measures announced by the RBI.

ICICI Bank managing director and president of CII, K V Kamath, who met finance minister P Chidambaram along with other bankers, said the bank would  watch the impact of RBI decision on liquidity and review interest rates in the next few days.

Chidambaram said he will also ask PSU banks to review rates to ensure that high interest rates does not constrain the economy from growing at eight per cent this year.

Industry has been demanding a steep cut in lending rates to ensure that credit is easily available and that the economy achieves a growth rate of 8 per cent.

Banking stocks across the board gained after the Reserve Bank freed up more money for banks and cut the benchmark interest rate to guard the economy from global recession. State Bank of India and ICICI Bank Ltd led a rise.

State Bank of India rose 14 per cent to Rs1,265 at the close, the biggest gain in more than 14 years. ICICI Bank Ltd. rose 7.6 per cent to Rs429.1, a two-week high. The Bankex index rose 7.5 per cent, the highest in three weeks.