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Public sector banks lower rates

A clutch of state-run banks announced cuts in their deposit and lending rates on Wednesday, a day after the central bank reduced its benchmark bank rate by a quarter percentage point in its mid-year monetary policy review.

The Reserve Bank of India cut the bank rate, its key signal, to a 29-year low of 6.25 percent on Tuesday, but said the benchmark would remain steady for six months unless circumstances changed.

It also cut the repo rate by a quarter percentage point to 5.5 per cent and banks' cash reserve ratio to 4.75 per cent from five percent.

Central Bank of India cut its deposit rates on Wednesday by between 25 and 100 basis points, depending on the maturity of the deposit. The cuts go into effect on November 1.

It also cut its prime lending rate, which it charges blue-chip corporate clients, by one percent to 11 per cent, in two phases, the first starting in December.

Officials at state-run Union Bank of India said deposit rates would be lowered by between 25-50 basis points, but gave no further details.

"After the credit policy, the signal is for deposit rates to be realigned downwards. We will also take a decision on lending rates soon," said Cherian Verghese, head of state-run Corporation Bank.

State-run State Bank of India, the country's largest commercial bank, was the first to cut rates, hours after the central bank's mid-year policy announcement on Tuesday.

It cut the rate on deposits with a maturity of more than three years by 50 basis points to 6.75 per cent, with immediate effect.

An official said the bank would review its prime lending rate in the next few days.

India's state-run banks dominate both lending and borrowing, cornering close to three-fourths of the total business in the country.

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