Four public sector banks - Oriental Bank of Commerce, United Bank of India, Allahabad Bank and Punjab & Sind Bank - have cut their prime lending rates between 0.25 and 0.50 percentage points effective 1 April.
The reduction in PLR will make all lending rates linked to it, namely, home, auto and other loans, cheaper.
Oriental Bank of Commerce (OBC) said it will cut its lending rate by 50 basis points to 12 per cent from next month.
"OBC announces across-the-board reduction in its PLR by 50 basis points from 12.5 per cent to 12 per cent effective from 1April 2009," OBC said in a statement.
"The bank is also likely to cut its deposit rates in a day or two," a senior OBC official said.
Kolkata-based United Bank of India announced a 25 basis poins reduction in its PLR to 12.25 per cent effective 1 April.
Allahabad Bank also announced a similar 25 basis point reduction in its base lending rate from 12.50 per cent to 12.25 per cent.
In a filing with the Bombay Stock Exchange, the bank also said it would also realign interest rates on term deposits of varying maturities.
Meanwhile, Punjab National Bank, the country's second largest state-run lender, on Friday said there was no further scope for the banks to slash their lending rates.
"I do not see interest rate coming down in the recent scenario. If it does, it would be marginally. There is always a scope for it (cutting interest rate) but there is not that much scope now," PNB CMD K C Chakrabarthy told reporters.
Indian Banks' Association (IBA) Chairman T S Narayanasami had also said that there is no more headroom for banks to cut their prime lending rates (PLR) and deposit rates.
The government on Friday announced that it will borrow an additional Rs1,40,000 crore during the first half of fiscal 2009-10 to fund increasing public expenditure.