Following the meeting with Finance Minister P Chidambaram some of the public sector banks are reducing their base rates.
The recent bank to join the club is Oriental Bank of Commerce (OBC), which trimmed its base rate by 25 basis points, or 0.25 percentage points, from 10.25 per cent to 10 per cent. The reduction in the interest rate would come to effect from July 22.
All loans linked to base rate would become cheaper by at least 0.25 per cent. Base rate is the minimum lending rate below which banks cannot lend.
During his meeting with the chiefs of state-run banks,
Chidambaram urged them to reduce lending rate in order to revive investment cycle and thereby promote economic growth.
Chidambaram feels that reduction in the base rate would be a powerful booster for the economy and a powerful stimulus to credit growth.
Some of the other lenders who reduced interest rate recently include Canara Bank, Union Bank of India and Bank of India.