State-run Union Bank of India (UBI) on Monday reduced its minimum lending rate or base rate by 0.25 per cent to 10 per cent.
The city-headquartered lender slashed its base rate to 10 per cent effective Monday, July 8, the bank said in a statement.
UBI's card rate for home loans has come down to 10 per cent, while the same for auto loans would be 10.45 per cent, it said.
Without any cue from the Reserve Bank of India (RBI), state-run lenders started announcing interest rate cuts after a meeting in New Delhi last week where Finance Minister asked them to slash rates in order to push up sagging investments to prop-up growth.
By not reacting to three consecutive cuts in the repo rate by the RBI, banks have invited criticism for not passing them to customers in the form of an interest rate cut.
Banks claim their cost of fund structures do not change even with the RBI moves to cut the interest rate, pointing to the deposit rates, which continue being high due to difficulties in mobilisation, and competition from other investment products like postal savings.
"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 rates of other banks is 10.2 or 10.25. We have asked them to take a look at the base rate," Mr Chidambaram had said after meeting state-run bank chiefs.