Nudged by RBI, country's biggest bank State Bank of India (SBI) on Tuesday cut base lending rate by 0.15 percentage point to 9.85 per cent, becoming the first major lender to ease the rate in many months.
SBI chief Arundhati Bhattacharya
The new rate is effective April 10. SBI Chairman Arundhati Bhattacharya said other lenders should follow the move and lower their rates. She also hinted at lowering of deposit rates going forward.
The surprise cut came after Bhattacharya earlier on Tuesday sought to defend banks not lowering rates despite two successive easing of monetary policy by the RBI since January. SBI cut minimum lending rate or base rate by 15 basis points to 9.85 percent, making it the cheapest source of funds in the industry.
The move came even as the Reserve Bank on Tuesday left repo rate unchanged at 7.5 per cent in its policy review earlier in the day.
In a post policy meeting with the reporters in Mumbai, Bhattacharya, however, said: "You have to understand both ways it takes a little time for the things to pass through. And, it is not only the cost of deposits that determines this, the passing through is also determined by the amount of liquidity, the amount of credit demand and competition which also drives rates up or down. There are very many factors and repo is only one of the factors."
Since January this year, the Reserve Bank has cut repo rate by 50 basis points in two out-of-the-policy move. However, very few of the lenders have lowered their base rate.