Axis Bank, Punjab National Bank and Bank of Baroda, among others, revised their base rates on Tuesday.
In its third rate cut this fiscal (20 bps in April and 10 bps in June), Axis Bank cut its base rate to 9.50 per cent from 9.85 per cent. “The new rate will be with effect from October 5, 2015.
“Accordingly, the effective rate applicable to various fund-based credit and credit limits which are linked to the bank’s base rate will reduce by 35 basis points (bps),” Axis Bank said in a statement.
Punjab National Bank cut its base rate by 0.40 per cent, from 10 per cent to 9.60 per cent, from October 1, Bank of Baroda by 0.25 per cent to 9.65 per cent, and Oriental Bank of Commerce by 0.20 per cent to 9.7 per cent.
OBC, UCO, IDBI too Oriental Bank of Commerce (OBC) has reduced its base rate from 9.9 per cent to 9.7 per cent. This revised rate comes into effect from Wednesday. OBC had last cut its base rate on August 17 by 10 basis points to 9.90 per cent from 10 per cent.
IDBI Bank and UCO Bank have cut their base rates by 25 bps each to 9.75 per cent and 9.70 per cent, respectively.
SBI’s is lowest After the RBI cut the key policy rate by an unexpected 50 bps on Wednesday, State Bank of India cut its base rate by 40 bps to 9.30 per cent, Bank of India by 25 bps to 9.70 per cent, Andhra Bank by 25 bps to 9.75 per cent, and State Bank of Travancore by 20 bps to 9.95 per cent.
In early September, HDFC Bank, India’s second-largest private lender, had cut its base rate by 35 bps to 9.35 per cent. Currently, SBI, India’s largest bank, has the lowest base rate. ICICI Bank (largest private bank) has a base rate of 9.7 per cent.
Base rate or the minimum lending rate is the benchmark rate to which all loans of the bank are linked.
A reduction in base rate leads to shrinking of margins for banks. However, in the past few months, deposit rates have come down by 75-100 bps. Since the cost of funds for banks have fallen, the impact on margins due to reduction in base rate will be limited, analysts point out.
For SBI, the impact on margins is likely to be to the tune of 10-12 bps.
Since January this year, the banking regulator has lowered its repo rate by 125 basis points. The RBI has been constantly nudging banks to pass on the rate reduction to borrowers.
Bankers argue that an increase in bad loans had been putting pressure on their margins with interest-earning assets increasingly slipping into non-performing assets. This, in turn, has deterred banks from cutting lending rates.