With this, five public sector banks have pegged their PLR at 15.5 per cent. They are State Bank of India, Bank of Baroda, Corporation Bank, Union Bank and Bank of India.
While SBI, BoB, Corporation and Union Bank have slashed their PLR in two stages with a 50 basis point cut in each stage, BoI has done so at one go.
The primary reason behind the cut in PLR is the sagging credit offtake. Most banks have recorded a negative credit growth in the first five months of this fiscal with the SBI leading the pack.
The largest public sector bank, which had recorded a Rs 2,600-crore net decline in credit offtake till July, managed to arrest the slide in August when the credit decline came down to about Rs 2,300 crore.
"We are hoping that with the cut in PLR, the prime borrowers, who have been shunning bank finance, will start lifting advances," a senior banker said.
An increasing number of corporates have been accessing the commercial paper market as the CP rate has pierced the banks' PLR. Besides, the expanding debt market also offers a viable option to the corporates.
More From This Section
With the BoI bringing its prime lending rate down to 15.5 per cent, the gap between the prime rates of weaker nationalised banks and the profit making ones has been widened to a full 100 basis points.
Most of the weak banks -- except United Bank of India (UBI) -- have pegged their PLR at 16.5 per cent. UBI has pegged it at 16 per cent.
Mumbai-based Dena Bank and a few others which have not yet touched their PLR ever since SBI initiated the cuts, may bring it down to 16 per cent in the next few weeks, while others prefer to wait for the busy season credit policy announcement.
"Even if we do not effect any cut, credit is bound to pick up from October, once the busy season starts. I do not see any reason why we should bring down the PLR," a banker said.
Among the