"Our asset liability committee met today and we decided to cut our base rate by 0.25 percent to 10.25 percent following the RBI decision," Union Bank of India Chairman and Managing Director D Sarkar told reporters here. The New Delhi-headquartered Punjab National Bank also informed the BSE that it will be reducing its rate by a similar measure to 10.25 percent effective February 9. "We have decided to pass on the benefit of the rate cut to our customers but have not taken a call on the deposit rates," PNB Chairman and Managing Director KR Kamath told reporters in the capital.

Meanwhile, another state-run bank Oriental Bank of Commerce today announced that it has increased deposit rates on select bulk maturities from tomorrow by 25 bps. The bank will be offering 25 bps more to its bulk depositors, including NRO deposits of less than Rs 1 crore in different maturities of less than one year. The bank also said that following the recent RBI guidelines on bulk deposit categorisation it has merged term deposits of under Rs 15 lakh and above but less than Rs 1 crore.

The move to cut base rates by two state-run banks comes within two days of the RBI cutting short-term lending rate. IDBI Bank, State Bank of India and the Royal Bank of Scotland have already cut their base rates. Others, like HDFC Bank and Federal Bank have opted for reducing rates by up to 0.50 percent in particular categories of loans. However, both PNB and UBI did not cut their deposit offerings. Analysts feel that cutting the base rates ahead of a reduction in cost of funds will hurt the banks' margins even as they are faced with a slowdown in the deposit mobilisation during the fiscal.

PTI