The country's largest lender, State Bank of India, has revised its the Benchmark Prime Lending Rate (SBAR) 50 basis points downwards from 12.25 percent p.a. to 11.75 percent p.a. with effect from 29th June 2009.

Since November last year, when the regulator - Reserve Bank of India indicated lowering of the interest rates, the bank has reduced BPLR by 200 basis points.

During the first quarter of this fiscal, the bank reduced the deposit rates on four occasions, but the lending rates were not reduced considering the inverse impact of same on the net interest margin of the bank. Earlier, the bank reduced SBAR in January.

It is expected that with this reduction in the benchmark prime lending rates, the Net interest margin would be reduced by 5-6 basis points. Quoting a senior SBI executive, "The effect on NIM is limited as the bank has aggressively reduced its deposit rates."

Following the suite, other banks are expected to reduce the lending rates as well. The first mover in reducing lending rates after the finance minister call on reducing the interest rates was Union Bank of India, which reduced its benchmark prime lending rate (BPLR) by 25-basis points to 11.75 percent per annum with effect from July1, from the earlier 12 percent per annum.

Another, PSB, Syndicate Bank has also reduced BPLR by 50 bps, from 12.50 percent to 12 percent per annum, with effect from July 1, 2009.