Hence, the Bank Rate was reduced by 25 basis points, from 5 percent to 4.75 percent in August 2019. Consequently, the prime lending rate of commercial banks declined from 6.5 percent to 6.25 percent. Deposit interest rates generally increased despite the high levels of market liquidity.
This seemingly paradoxical outcome can be explained by the funding structure of banks, characterised by competition for corporate and other volatile institutional deposits that are important for several of the commercial banks.