The Union Bank of India, which is headquartered in Mumbai, has announced a announced a reduction in the minimum lending rate by 10 basis points.

The move from the state-run bank had surprised analysts and is likely to force competitors to follow soon. Union bank has taken the lead in cutting the rates at a time when all other banks are waiting for a sign from the central bank, The Reserve Bank of India (RBI). The bank's prime-lending rate now stands at is 15.50%.

"Our asset liability committee, in its quarterly review of interest rates, has decided to bring down the base rate by 10 basis points from 10.75% to 10.65% with immediate effect," said the bank in a statement.

The RBI has indicated that the interest rates will not be hiked anymore as there are signs that the high interest rates have affected economic growth in the country. The central bank had increased the rates more than a dozen times since march 2010 in order to control the high rate of inflation.

The move by the Union Bank indicates a new direction for the interest rates after a period of more than two years.