Following the cut in deposit rates by the industry leader, State Bank of India (SBI), two more banks are expected to reduce their interest rates in this week.

PSU banks including Bank of Baroda (BoB) and UCO Bank are amongst the two known lenders expected to reduce their rates. The former is expected to reduce the deposit rates under various maturities by 50 to 75 basis points while the latter has decided to trim both its lending and deposit rates by 50 basis points.

Bank of Baroda Chairman and Managing Director M D Mallya said, "We plan to reduce deposit rates by 0.50-0.75 percent in various maturities in the near future. Once the deposit rates ease, we may also examine scope for lending rate reduction."

UCO Bank's CMD, S K Goel said, "Cost of deposits are still high, which needs to come down. Once the deposit rates ease, that would give room for banks to bring down their lending rates as well."

"We are looking for a 0.5 percent reduction in both lending and deposit rates," said Goel.

The Asset Liability Committees (ALCO) of both the banks are planned to meet this week with a view to take a decision on rate cut.

In fact, BoB has lowered its benchmark prime lending rate (BPLR) by 50 basis points to 12% with effect from April 1st.

Although there has been enough liquidity in the system on the back of RBI following an easing monetary policy but yet the banks have not reduced the rates as per the expectations. The ample liquidity in the system gives room for further cut in the rates.

The Chairman of Indian Banks Association, T S Narayanasami said that the banks are expected to lower the lending as well as deposit rates by 50 and 50 to 75 basis points respectively in the coming two to three weeks.