Other banks are likely to follow suit immediately as most of the public sector banks run the risk of interest rate mismatches with a cut in lending rates. While the cut in lending rates will take immediate effect, the effect of the reduction in deposit rates will be felt after a time lag.

The foreign and new private sector banks will remain relatively unaffected by the interest rate mismatches as a bulk of their deposits are of shorter tenure and the revision in rates can take effect faster. Among the new private banks, ICICI Bank was the first to cut its differential interest rates on high value deposits beyond Rs 1 crore on Monday.

The cut in deposit rates at State Bank varied between 50 basis points and one percentage point at the medium and longer end of the maturity spectrum. The bank will now pay 9 per cent ondeposits between one and two years (down from 10 per cent), 9.5 per cent on deposits between two and three years (10 per cent) and 10.5 per cent on deposits of three years and above (11 per cent).

SBI and Bank of India cut the PLR to 12 per cent on Monday, immediately after the RBI cut the bank rate, repo rate and banks' cash reserve ratio. Bank of Baroda will cut its PLR to 12 per cent later this week while Dena Bank is expected to cut its lending rate to 12.5 per cent.

Among financial institutions, IDBI will cut its PLR at its forthcoming board meeting on March 8. At present, IDBI's PLR is pegged at 14 per cent with a band of 3.5 per cent at the higher end. "We will take a decision at the March 8 board meeting. The quantum of cut will depend on the board," IDBI chairman GP Gupta said.

ICICI is also expected to take a decision on the rate cut over the next few days. "We are closely watching the scene... We will soon take a view on this," said ICICI deputy managing director Lalitha Gupte.

Among thepublic sector banks, Bank of Baroda is expected to maintain its present deposit rates. "We offer the lowest rates on deposits among the public sector banks. We do not plan to bring it down further," BoB chairman K Kannan said.