Industrial Development Bank of India (IDBI), ICICI and Industrial Finance Corporation of India (IFCI) effected a 50 basis points cut in their prime-lending rate (PLR), bringing it down to an identical 13.5 per cent (exclusive of interest tax). IDBI and IFCI's minimum term-lending rates (MTLR) are equivalent to ICICI's long-term prime rate (LTPR) for loans beyond three years.

IDBI and IFCI have made their new rate effective immediately, while ICICI has made it from Thursday. Both IDBI and IFCI have reduced their short-term prime rate by 50 basis points to 12.5 per cent, while ICICI has revised it to 13 per cent. ICICI's medium-term prime rate (MTPR), applicable to loans for more than a year and up to three years, is also now pegged at 13 per cent. Neither IDBI nor IFCI has the concept of MTPR.

The institutions haveretained the maximum band of 3.5 per cent for each category of lending.

The reduction has been effected, consequent to the bank-rate cut by 100 basis points, said all the three institutions' release issued on Wednesday. Following the reductions in bank, repo rates and CRR, interest rates have shown a downward trend, the institutions said. As a result of the recent budgetary initiatives taken by the finance ministry and the subsequent RBI announcements, ICICI's borrowing costs are expected to decline moderately, said the ICICI release. "We watched the market closely. On an average, the interest rates have gone down by 50 basis points. We have decided to pass the benefit to corporates," an ICICI executive said.

The State Bank of India and Bank of India took the lead in cutting the prime-lending rates. Within hours of RBI announcement of rate cuts on March 1, both the public-sector banks slashed their PLR by one percentage point to 12 per cent. Bank of Baroda, Union Bank, Corporation Bank and Dena Bankfollowed suit by bringing down their PLRs between 12 per cent and 12.75 per cent. Most public-sector banks have also slashed their deposit rates.

However, foreign banks and private-sector banks have preferred to adopt a wait-and-watch policy. IDBI Bank was the first among new private banks to cut its PLR, while no foreign bank has taken the plunge yet. Senior bankers said another round of CRR cut, which will infuse sufficient liquidity into the system, will prompt these banks to cut their lending rates. The overnight call rates have been ruling over 10 per cent despite the 50 basis points CRR cut which infused over Rs 3,400 crore.

The advance-tax outflow and aggressive open-market operations by the RBI have sucked out liquidity from the system, bankers said.