Hours after Finance Minister P Chidambaram prodded public sector banks to reduce lending rates, Bank of India on Wednesday announced a cut of 0.25 per cent in base rate to 10 per cent.
The bank has decided to reduce its base rate from the existing 10.25 per cent to 10 per cent, Bank of India (BoI) said in a statement.
The new rate would be effective from July 8, it said.
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Base rate is the minimum lending rate below which a bank cannot give loan to any borrower.
Earlier in the day, Finance Minister P Chidambaram after meeting the heads of public sector lenders said he has advised the banks to reduce lending rates to stimulate credit growth.
“We have advised banks to take a look at the base rate. The base rate of SBI is 9.7 per cent. The average of the base rate of other banks is 10.2 or 10.25. We have asked them to take a look at the base rate,” he said.
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“I have impressed upon the bankers that the Reserve Bank of India has cut the policy rates by 125 basis points, and some part of this must indeed be passed on to borrowers,” he said.
“Cost of money has also gone up by 40 or 50 basis points, making it difficult to pass on rate cut to consumers. Nevertheless, all of them assured me that during the month of July, they will review their base rates and will take appropriate decision on cutting the base rate,” he said.
Mr. Chidambaram further added that the reduction in base rate would be a powerful booster to the economy and a powerful stimulus to credit growth.