Public sector, UCO Bank has declared 50 basis points cut in its prime lending rate (PLR) and deposit rates each with effect from February 1st. Presently the PLR of the bank is pegged at 13.5%.

The bank's Chairman and Managing Director S K Goel said, "The PLR of the bank will be reduced by another 0.5 percent from February 1. We have also decided to cut our deposit rates across various tenures by 0.5 percent."

Goel said that the rate cut were likely to come as RBI has always been prepared to use its monetary tools to support the banking system. "There is enough liquidity as of now. The central bank has been using a combination of measures to balance the liquidity conditions in the system. I expect further cuts in RBI's key rates in the near term," he said.

Even without any monetary action by the RBI in its third quarter review of annual credit policy, interest rates of the banks are likely to decline.

Canara Bank Chairman AC Mahajan said, "RBI's policy has given a broad hint for a benign interest rate regime. It is a matter of time before banks reduce both lending and deposit rates. I expect most banks will soon take a view on these rates."

Union Bank of India CMD, MV Nair agreed on his view and said, "Interest rates have come down. We may see rates easing within a month's time." Even Union Bank of India plans to reduce deposit rates to 7.5% from next month.

RBI has been constantly signaling banks to follow a soft interest rate regime and said that most banks have reduced lending and deposit rates to some extent but there are still some that are yet to take a move.

Recently UCO Bank has announced to disburse loans worth Rs 7,000-8,000 crore in the last quarter of the current fiscal.