The term-lending institution's decision to cut rate on its on-tap issue comes in the wake of a cut in banks' cash-reserve ratio (CRR) by one percentage point in the credit policy of the Reserve Bank of India.

IDBI has also removed from its on-tap window long-term papers maturing between five and seven years.

Talking to Financial Express, a top IDBI official said: "We are currently reviewing the rates for all our on-tap papers floating in the market. However, only after studying the market reaction on the interest rate scenario, we will take any further steps."

For the three-year on-tap paper, IDBI has slashed interest rate by 10 basis points to 11.65 per cent against 11.75 per cent on the paper before the credit policy announcment.

For the on-tap issues maturing within one- to three-year period, the institution has maintained the one-year paper at 10.75 per cent and two-year paper at 11.25 per cent.

The IDBI executive said the institution has currently put on hold resource mobilisation through the private placement route. "We do not feel a need to raise funds continuously from the market," he said.

According to market sources, the institution withdrew long-term papers maturing between three to five years from the market a few weeks ago as they were no takers for the papers at rates specified by them.

A few weeks ago the institution's five-year paper was quoted at 12.15 per cent and the seven-year paper was quoted at 12.5 per cent.

According to market sources, ICICI has put on hold resource mobilisation through private placement route. The institution has not raised any funds through on-tap issue. "The institution is likely to enter the market with revised rates," said market sources.

A few weeks ago, ICICI was in the market with a one year paper at 11.40 per cent and two year paper at 11.75 per cent.

According to market sources, corporate papers are offered at 20 basis points lower than the existing rates. However, there are very few takers at the new rates.

The money market has reacted sharply to the reduction in CRR by one percentage point. Call money rates eased to 8 per cent level on Monday. The government security prices have responded sharply as prices across all maturities have firmed up by almost 15-20 basis points implying further lowering in interest rates. In the secondary market, one-year paper maturing in 2000 at a coupon of 11.40 per cent is quoted at 10.7 per cent, 11.15 per cent 2002 paper quoting at 10.62 per cent, 11.99 per cent five year paper is quoted at 10.99 per cent and 11.90 per cent 2007 paper is quoted at 11.27 per cent.