SBI, Allahabad Bank cut base lending rates after RBI cuts repo rate

State-run lenders State Bank of India (SBI) and Allahabad Bank today announced reductions in their base lending rates, immediately after the Reserve Bank effected a reduction in its repo rate.

More banks are expected to follow suit, in a bid to revive credit growth.

SBI, the nation's top lender by assets, said it would cut its base lending rate by 15 basis points to 9.7 per cent from 9.85 per cent effective 8 June while Allahabad Bank announced a 0.3 per cent reduction in its base lending rate to 9.95 per cent from 10.25 per cent, also effective 8 June.

Dena Bank and Punjab and Sind Bank also said they would cut base rates by 25 basis points each.

Earlier in the day, the Reserve Bank of India cut the repo rate by 25 basis points, taking the total reduction this year to 75 basis points amidst a hue and cry for rate cuts to help boost economic growth (See: Rajan relents, cuts repo rate by 0.25 percentage points).

Against this, the maximum reduction in lending rates by banks has been within the region of 30 basis points. SBI's latest base lending rate cut takes its total rate reductions this year to 30 basis points.

Eight of the major state-run lenders who account for more than 70 per cent share of the assets, are yet to announce any interest cut, so far.

With the slowest growth rate in banks' lending for nearly 18 years, bankers hope aggressive rates cut would spur credit growth.

"There is not over much of liquidity. More of liquidity would also enable better transmission of rate cuts," State Bank of India chairman Arundhati Bhattacharya said in a television interview earlier on Tuesday, following the RBI rate decision.

"As we see a little bit of the credit growth coming in, it will make it much easier for the banks to pass on the rate cuts," Bhattacharya said ahead of SBI's rate cut announcement.

SBI expects its lending to grow by about 14 per cent in the fiscal year that began in April, compared with an adjusted 10.5 per cent increase posted last year.