8 banks reduce base rates after cut in Repo Rate

Following the reduction in the policy rate by 25bps to 7.75% on January 15, 2015, the median base (lending) rate of banks declined by 5 bps to 10.20% so far (upto February 23, 2015). Eight banks (2 Public Sector Banks, 1 private sector bank and 5 foreign banks) have reduced their base rates in the range of 25-50 bps so far.

The Reserve Bank of India (RBI) had cut the Repo Rate recently. It has reduced the Repo Rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) from 8.0% to 7.75% on January 15, 2015.

With the introduction of Base Rate System since July 1, 2010, all rupee lending rates (including advances upto Rs. 2 lakh) have been deregulated. Accordingly, the interest rates on rupee advances are determined by banks with the approval of their respective Boards. In a deregulated environment, banks have complete freedom in deciding their spread, risk premia, term premia and other customer specific charges as considered appropriate on the loans and advanes based on their commercial judgment.

Source : Equity Bulls

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