With banking giant SBI and about a dozen lenders reducing their interest rates, the remaining PSU banks are likely to follow suit and slash interest rates in the next few days to pass on the benefit of rate cut by the Reserve Bank and boost the economy, sources said. Even private sector banks are expected to follow the market trend in order to protect their business, sources said adding they too are expected to lower the rate in the next few days.

About a dozen banks including IDBI, Oriental Bank of Commerce, and Allahabad Bank have reduced the key lending rate in the last two days and the rest state-run lenders are expected to follow the suit in the coming days, sources said.

The reduction in the interest rate will help spur consumption as this will bring down EMIs for home, auto and corporate loans.

Finance Minister Nirmala Sitharaman on Monday met heads of both public sector and private sector lenders in the Department of Financial Services (DFS), to deliberate on interest rate, credit growth along with progress of resolution of bad debts under IBC.

The meeting with bankers was followed by meeting with MSME and auto sectors. The Finance Minister is holding series of meetings with various sectors of the economy in order to understand issues faced by them and assuring them of quick actions from government end to spur growth which has hit five-year low of 6.8 per cent.

The meetings being conducted on different sectors have been showing results, Finance Secretary Rajiv Kumar said.

Reserve Bank of India Governor Shaktikanta Das have been asking lenders to pass on benefits of interest rate cut by the central bank to customers.

Hours after RBI's reduction in the repo rate by 35 basis points to 5.4 per cent earlier this week, the largest lender State Bank of India (SBI) trimmed its lending rate by 15 basis points effective August 10 across all tenors. It was followed by several other public sector lenders including Bank of India, Union Bank of India and Andhra Bank by up to 30 basis points.

Other banks that passed on rate cut include Allahabad Bank, IDBI Bank Oriental Bank of Commerce and Syndicate Bank.

After delivering a 35-bps rate cut in the policy, the RBI governor said that he expects banks to follow the lead of the financial markets, where there was full transmission of policy rates that were reduced in the current cycle of easing.

The weighted average call money rate declined 78 basis points, market repo rate is down 73 basis points, 10-year benchmark yield lower by 102 basis points, but banks have only transmitted 29 bps between February and June on fresh rupee loans, the governor had said.