The move by RBC RY.TO takes its prime rate to 2.85 percent from 3.0 percent and is effective Wednesday, RBC said.

It is the first of Canada's big six banks to cut its prime lending rate in the wake of the Bank of Canada's surprise decision Jan. 21 to cut overnight borrowing costs by a quarter of a percentage point to counter the effects of cheaper oil on economic growth and inflation.

Canada's biggest banks, which include RBC, Toronto-Dominion Bank TD.TO, Bank of Nova Scotia BNS.TO, Bank of Montreal BMO.TO, Canadian Imperial Bank of Commerce CM.TO and National Bank of Canada NA.TO, have come under fire for not immediately cutting their lending rates after the central bank's rate cut.

By not passing on the full rate cut to borrowers, the banks can protect their net interest margin, which boosts profits.

Typically, once one bank cuts its prime rate the others follow in order to remain competitive with borrowers.

(Reporting by Andrea Hopkins)