Mumbai, Apr 7 (PTI): State Bank of India, the country’s largest bank, reduced its base lending rate by 15 basis points to 9.85 per cent on Tuesday, following a nudge from the central bank earlier in the day.

HDFC Bank, one of the largest private sector banks, followed suit with a similar cut that took its lending rate to SBI’s level.

SBI said the new rate is effective April 10. HDFC Bank’s rate, however, will be effective April 13.

SBI Chairman Arundhanti Bhattacharya said other lenders should follow the move and lower their rates. She also hinted at lowering of deposit rates going forward.

Earlier in the day, Bhattacharya had sought to defend the decision of banks not to lower lending rates despite two successive moves by the Reserve Bank of India since January to ease monetary policy.

At Tuesday’s monetary policy review meeting, the RBI left the repo rate unchanged at 7.5 per cent while criticising banks for not passing on the 50-basis-point cut in repo rate effected in two out-of-the-policy moves since January this year.

At a meeting with reporters here after the RBI announcement, the SBI chairman had said that the question of passing on the RBI’s rate cuts depends not only on cost of deposits but also credit demand and competition.

“You have to understand both ways it takes a little time for the things to pass through,” Bhattacharya had said. “And, it is not only the cost of deposits that determines this, the passing through is also determined by the amount of liquidity, the amount of credit demand and competition which also drives rates up or down.”

She had said that there are very many factors and repo is only one of the factors.

Despite the earlier RBI cuts in the repo rate, very few lenders had lowered their base rate.