"The new base rate or minimum lending rate (at 10.25 per cent) will be effective from February 1," the bank said in a release.
The base rate is the minimum lending rate below which banks cannot offer any loan to customers.
IDBI Bank was the first one to cut lending rates following the announcement of the RBI to reduce short-term lending rate by 0.25 per cent and deciding to slash Cash Reserve Bank (CRR) by same margin to inject Rs 18,000 crore of liquidity into the system.
Mumbai-based IDBI Bank has reduced the benchmark prime lending rate (BPLR) and fixed deposit rates on select maturities by 0.25 per cent.
"IDBI Bank has taken this proactive step keeping in view the policy measures announced by the RBI in its third quarter review of monetary policy today," it said.
The reduction in interest rate is expected to positively impact loan growth both in retail and corporate segments.
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Various other banks including the market leader State Bank of India (SBI) said that they would take a call on reducing interest rates in coming days.
National Housing Bank (NHB) has earlier announced cut in lending rates by 0.25 per cent benefiting the home loan borrowers.