Union Bank of India cuts rate by 10 basis points
While the Reserve Bank of India (RBI) is still brooding over plans to cut key rates, Union Bank of India on Thursday astonished the market by announcing a cut of 10 basis points in its lending rate.
State-owned Union Bank of India's lending rate now stands at 10.65 per cent.
Union Bank of India chairman MV Nair said that the cut in lending rate would boost loan demand and provide the bank with an edge over peers.
The lender's prime-lending rate is at 15.50 per cent.
Making the announcement, the Mumbai-headquartered bank said, "Our asset liability committee, in its quarterly review of interest rates, has decided to bring down the base rate by 10 basis points from 10.75% to 10.65% with immediate effect."
Since March last year, the RBI has raised the repo rate, the rate at which lenders borrow from the central bank, as many as 13 times in order to tame inflation. It is now expected to begin slashing key rates, but it has signaled that it wouldn't slash rates unless inflation falls to his comfort level of 7 per cent. The RBI's repo rate currently stands at 8.5 per cent.
Analysts believe the central bank to begin slashing key rates by March-April 2012. Economist Indranil Sen Gupta, from Bank of America Merill Lynch, expects lending rates to come down by 100-150 basis points in the April-September slack season.
