State-owned Bank of India today reduced the base rate or the benchmark lending rate by 0.25 per cent to 9.95 per cent which will make auto, home and other loans cheaper.
The new rate will come into effect from May 4.
“The Bank has decided to reduce its Base Rate by 25 basis points to 9.95 per cent (from existing 10.20 per cent) w.e.f. May 4, 2015,” the Bank of India said in a BSE filing.
The cut in the base rate will provide relief to borrowers as the rates of interest on auto, home and other loans are linked to it.
Several other banks including the market leader State Bank of India (SBI) and private sector lenders like ICICI Bank and HDFC Bank have cut lending rates by 0.15 to 0.25 per cent following RBI Governor Raghuram Rajan’s tough talk last month.
The RBI had reduced the policy rate by 0.5 per cent in two tranches since January.
Referring to the reluctance of the banks to pass on the rate cut to the borrowers, Rajan termed as “nonsense” the lenders claim that cost of fund was still high.
“The banks’ marginal cost of funding (has) fallen, the notion that it hasn’t fallen, is nonsense; it has fallen!” Rajan said on April 7 triggering reduction of lending rate by borrowers.