Although banks have been reluctant to follow RBI's signal to lower the lending rates since a long time but now the interest rates seem to decline resentfully.

Private lender, ICICI Bank has slashed its floating reference rate by 50 basis points to 13.25% following the RBI's strong signals sent in its credit policy report on Tuesday. The floating reference rate of the bank would be applicable for all consumers including the home loans.

The banking regulator, RBI has slashed the repo and the reverse repo by 25 basis points to 4.75% and 3.25% respectively in its credit policy report. The rate cuts have been done to revive the slowing economy that is anticipated to grow at an annual rate of 6% during the report. Earlier in 2008-09, this rate was projected to be around 6.5 to 6.7%.

Although RBI has resorted to several cuts in its key policy rates since October, banks especially the private ones have only shaved their rates by up to 125 basis points. In its policy review, RBI expressed concerns over weak transmission of its monetary policy. It said that banks have not been passing on the benefits of policy cuts to the customers.

Further the regulator tried to persuade banks that there was enough headroom to cut rates. "Reduction in interest rates across the term structure and markets has not been uniform. There is scope for the overall interest rate structure to move down within the policy rate easing already effected by the Reserve Bank," it said in its annual policy statement.

ICICI answered to the RBI's signal immediately after the announcement on rate cuts. However last time the bank had not responded to the regulator's call.

The bank has not only made consumer loans cheaper but also lowered the benchmark prime lending rate by 50 basis points to 16.25%. This cut is expected to benefit the corporate customers of the bank.

Meanwhile home loan financier, HDFC said that it had no plans to cut the rates. The financer had recently cut its rates by 50 basis points.

The largest lender, SBI has also not yet made its stand clear. Last year the bank had cut the rates in January.

Even the public lender, UCO Bank said that its board of directors would meet soon to consider a cut in its prime lending rate.