Currently, the interest rate on fixed deposits above 1 year is pegged at 8.25%.
State-owned Indian Bank slashed base rate or the minimum lending rate by 0.3% while United Bank of India (UBI) has reduced fixed deposit rates by up to 0.25% on select maturities.
With the reduction, the base rate would be 9.95% from 10.25% effective June 8, Indian Bank said in a statement.
All loans linked to the base rate would come down by at least 0.3%, it said.
The bank has revised its interest rates on its retail term deposits for 1 year to 8% and above 1 year to 7.75%, UBI said in a statement.
Currently, the interest rate on fixed deposits above 1 year is pegged at 8.25%.
The new rates will be effective from June 8, it said.
PNB and Axis Bank had yesterday reduced fixed deposit rates.
The decision by banks to cut interest rates on fixed deposits comes two days after the Reserve Bank reduced key policy rate.
As part of its second bi-monthly monetary policy review, RBI cut the repo rate (short-term lending rate) from 7.5% to 7.25, but left other policy tools like cash reserve ratio unchanged at 4% and Statutory Liquidity Ratio (SLR) at 21.5%.
Following policy action, several banks including market leader State Bank of India have reduced base rates or minimum lending rate. SBI cut it to 9.70% from 9.85% effective June 8.
Allahabad Bank cut base rate by 0.30% to 9.95%, while Dena Bank, Punjab & Sind Bank reduced their base rate by 0.25% each. Dena Bank and Punjab & Sind Bank lowered their base rate to 10%.
With these reductions, all loans linked to the base rate will come down proportionately.
IDBI Bank, however, has reduced bulk deposit rate, a move which is a precursor to a cut in lending rate.
Other banks are likely to follow suit in the next few days.
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