Fresh rate cut by SBI to make loans cheaper

DOUBLE DEAL: For a second time in 10 days, SBI has slashed PLR by 0.25 per cent.

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• SBI slashes lending rate by 0.25 per cent
• SBI hikes interest rates on home, car loans
• Banks hike PLRs, home loans spared

Keywords: Car Loan, Home Loan

New Delhi: There is good news for borrowers. Home and car loans are set to get cheaper after SBI and three other public sector banks cut interest rates, raising expectations that private banks will now follow suit.

State Bank of India, the leader of PSU banks, cut rates by a quarter per cent to 12.5 per cent on Wednesday while Bank of India, Union Bank and Canara Bank have brought their rates down to 12.75 per cent.

It was for the second time in less than 10 days that country's largest lender SBI has slashed prime lending rate by 0.25 per cent to 12.25 per cent.

Earlier on February 11, the bank had announced a cut in the PLR by 0.25 per cent, effective February 16.

While most PSU banks have cut their rates by half a per cent in the past 10 days, the reduction in the PLR is likely to moderate lending rates for all category of borrowers. Many banks had cut rates recently following the RBI Governor's offer to revise its interest rates.

Earlier last month, housing finance company HDFC and PNB Housing Finance too had reduced interest rate on housing loan. While HDFC reduced its RPLR by 0.25 per cent effective February 1, PNB Housing Finance slashed the rates by 0.5 per

cent.

RBI Governor Y V Reddy, while announcing the quarterly monetary policy review on January 29, had asked bankers to explore the possibility of reducing interest rates in the light of high net interest margin.

Last week, Finance Minister P Chidambaram had asked the public sector banks to ensure adequate loans for housing and consumer durables, as these areas have been partly affected by a 'conscious' moderation in credit flow over the past one year.

"Consciously, over a period of a year, there has been a slowing down of credit growth. However, this slowing down of credit has indeed, to some extent, affected flow of credit to the housing sector and consumer durables sector," he had said after a review meeting with PSU bankers.