Several banks have cut their prime lending rates (PLR), making loans cheaper. This could also lead to cut in home loan rates in the near future. Last fortnight, India’s largest public sector bank, State Bank of India (SBI), slashed its benchmark PLR by 75 basis points (bps) to 13 per cent, effective 13 November. It also declared a drop of 50 bps on deposits with tenors of between 91 days to 5 years and 25 bps on deposits above five years, effective 1 December.The move follows Finance Minister P. Chidambram’s advice to banks to “begin brisk lending to unlock liquidity”. Initially, SBI had increased its interest rates, along with ICICI Bank, for home loans (see Roller Coaster, 19 November).
Other banks that have followed SBI are Allahabad Bank, Dena Bank, Indian Overseas Bank, Corporation Bank and Oriental Bank of Commerce. All the banks have slashed their PER by 75 bps. The PER for Allahabad Bank will now be 13.25 per cent and that of Dena Bank is 13.50 per cent. For the rest, it will be
13 percent.
Says Alok K. Mishra, chairman and managing director, Oriental Bank of Commerce, “We are happy to announce a reduction in the PLR. We have also Cut interest rates on housing loans up to Rs 30 lakh and that on education loans.”
Citibank, the country’s leading multi-national bank, too, followed the rate cut trend. It cut its PER by 50 bps-its new PER is 15 per cent. Good tidings. According to industry sources, the move could result in decrease in home loan rates across all banks. Bank of India has already cut home loan rates by 75 bps across maturity terms. The bank’s revised interestrates are 9.25 per cent for home loans up to Rs 30 lakh, and 10.25 per for loans between Rs 30 lath and Rs 50 lakh.
Rates inertia. However, the two big private sector banks, ICICI Bank and HDFC Bank, are still shying away from any rate cut, saying they are waiting for more signals.
No rate cut is expected in auto loans. Three major auto financers- ICICI Bank, HDFC Bank and Kotak Mahindra Bank-have no plans to cut rates as of now. Says N.R. Narayanan, vehicles loan head, ICICI Bank, “We have yet to decide on rate cuts.”
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