"PNB has decided to decrease the base rate (or minimum lending rate) by 0.25 percent from 10.50 percent to 10.25 percent with effect from 9 February 2013," the bank said in a filing to the Bombay Stock Exchange (BSE).
RBI also decided to inject Rs 18,000 crore of additional liquidity into the system by reducing the cash reserve ratio by same margin.
The lowering of the lending rate by banks will provide relief to prospective borrowers of auto, home and corporate loans. It will also have a bearing on those existing borrowers who had obtained loans from banks at floating rate of interest.
With the trend being set by market leaders, several other banks are likely to follow suit and lower their lending rates in the coming days.