Country's largest private bank - ICICI Bank - and the second largest state run bank- Punjab National Bank - lowered their lending and deposit rates taking a cue from the cut in policy rate by the Reserve Bank of India (RBI).

The reduction in lending rate or base rate - the minimum rate at which it lends - will result in a lower home loans, education and auto loans rates for existing and new customers since these loans are given at a mark-up to base rate.

ICICI Bank revised its base rate by 25 basis points to 9.75% while Punjab National Bank cut base rate by 25 bps to 10.50%. IDBI Bank was the first bank to lower lending rates to 10.50% yesterday after the RBI cut the repo rate by 50 bps on Tuesday signaling a lower interest rate regime.

However, most bank will watch for the stand that country's largest bank - State Bank of India - takes on the lending rates. SBI's base rate is pegged at 10%. The move to lower rates in case of most public sector banks is also prompted by a dictate from the finance ministry asking banks to lower lending rates following a policy rate cut by RBI.

Commenting on the cut in rates, Chanda Kochhar, MD & CEO said, "With the easing of systemic liquidity, we have already seen some correction in wholesale deposit rates. We expect the cost of funds to gradually come down and this reduction in the lending rates is a proactive move by us to pass on the benefit to our valued customers."

ICICI Bank revised rates would be with effect from April 23 while PNB has said that its revised rates would come into effect from May 1, 2012. (Economic Times)