The Hindu : Business : State Bank cuts prime lending rate

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Tuesday, Feb 12, 2008
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State Bank cuts prime lending rate

Will moderate lending rates for all categories of borrowers

MUMBAI: State Bank of India on Monday slashed the Prime Lending Rate by 0.25 percentage point to 12.50 per cent, a decision that will make housing and car loans cheaper. “The Benchmark Prime Lending Rate is revised downward by 0.25 percentage point from 12.75 per cent to 12.50 per cent with effect from February 16,” SBI said in a communication to the Bombay Stock Exchange.

The reduction in PLR is likely to moderate lending rates for all categories of borrowers, including housing (floating rate), corporate, car loan and the like.

The decision follows the up to one per cent cut in housing and consumer loan rates announced by Canara Bank and Allahabad Bank. Housing finance company HDFC and PNB Housing Finance too had reduced the interest rate on housing loan.

While HDFC reduced its RPLR by 0.25 percentage point effective February 1, PNB Housing Finance slashed the rates by 0.5 percentage point.

UCO Bank and Indian Overseas Bank are also expected to reduce the prime lending rate after their asset-liability committee (ALCO) meeting later this week.

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.

Even Finance Minister P Chidambaram, after meeting bankers on January 4, had underlined the need to cut deposit and lending rates by half a percentage point to spur investment and consumption so that the economy can be sustained on a high growth path. “I would like, I can’t wish this, that banks cut lending and deposit rates by 50 basis points so that it stimulates investment and consumption,” he had said.

Mr. Chidambaram is again meeting heads of public sector banks on Tuesday in New Delhi for a review of the banking sector. — PTI

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