Bank of India announced on Monday a 75 basis point (bps) cut in its benchmark prime lending rates.
With this reduction, the banks BPLR will fall to 12.50 per cent from January 1. The bank has also lowered its deposit rates by 25-100 bps across various maturities.
The maximum rate available would be 8.75 per cent for deposits of two years and above.
BoI's rate-cut decision comes close on the heels of State Bank of India, the country's largest lender, slashing its deposit and lending rates on Saturday, thereby putting fresh pressure on other public sector players to follow suit.
Other public sector banks that are likely to announce interest rate cuts over the next few days include Bank of Baroda, Allahabad Bank, Canara Bank, Corporation Bank, UCO Bank and United Bank of India.
Last week, during a meeting with Finance Secretary Arun Ramanathan, public sector banks had agreed to lower rates from January.
Corporation Bank is expected to cut its BPLR by 50-75 bps during the course of the week.
"Our present BPLR is 13.25 per cent and we will decide on reducing it in the Alco meet during the week," an executive of the bank said.
An Allahabad Bank executive said the bank might reduce deposit rates by 25-75 bps across maturities, while the benchmark PLR was proposed to be lowered by 75 bps.
Similarly, Uco Bank is looking at a 50-75 bps reduction in rates. United Bank of India is expected to decide on the extent of rate cuts later this week.
IDBI Bank chief financial officer R Bansal, however, said that the decision to revise rates would be based on the cost of funds and competition.
"With a limited branch network and lower share of current and saving accounts, the cost of funds tends to be higher for us than other commercial banks," he said.
At present, the bank's PLR is 13.5 per cent.
On Saturday last, SBI reduced its BPLR by 75 bps to 12.25 per cent, thereby taking the total cut to 150 bps over the last two months.
However, most of the private sector lenders have largely refrained from slashing rates.
Only HDFC Bank, its parent and mortgage player HDFC and Yes Bank have so far announced cuts in the BPLR by 50 bps each.
