Canara Bank cuts base rate by 0.30%, loans may get cheaper

State-owned Canara Bank has cut its base rate or the minimum lending rate for all loans by 0.30 per cent to 9.95 per cent from 10.25 per cent, the bank said in a statement to BSE on Thursday.

The rate cut which is effective from July 8 may translate into cheaper home, auto loans for customers.

Base rate is the minimum lending rate below which a bank cannot give loan to any borrower.

Finance Minister P Chidambaram on Wednesday had met heads of public sector lenders and advised the banks to reduce lending rates to stimulate credit growth.

Hours after the Finance Minister's advice, Bank of India on Wednesday cut its base rate 0.25 per cent to 10 per cent from 10.25 per cent, effective July 8.

Canara Bank becomes the second bank after Bank of India to cut rates, even as the largest lender of the country SBI has said it cannot cut its base rate any further as it is already the lowest in the industry. SBI's base rate is 9.7 per cent.

The Reserve Bank of India Governor D Subbarao earlier on Thursday echoed Mr Chidambaram's sentiments and urged banks to pass on the benefit of rate cuts to customers.

The RBI this year has already cut repo rate-the rate at which it lends short-term money to banks-by 0.75 per cent bringing it down to 7.25 per cent. However, none of the banks had passed on the benefit until Wednesday when Bank of India cut its base rate.

The country's economy is 2012-13 grew a t a decade-low 5 per cent, while credit growth also fell to 15.62 per cent from 17.76 per cent in 2011-12.