SBI, BOI cut lending rates

India's largest bank State Bank of India has announced to reduce its Prime Lending Rate (PLR) on Monday by waving it up to 0.25%. Before this, HDFC earlier in this month has reduced its PLR by same 25 basis points, now both of the banks have reached on the same level.

The SBI has announced on Monday to cut 25 basis point in its prime-lending rate (the rate at which it lends to its best borrowers) from 12.75% to 12.50%. SBI has also announced to cut its advance rate also known as SBAR (SBI advance rate) to lower the interest rate on home loans, auto loans, personal loans and others.

Following the path, the Bank of India (BOI) has also reduced the interest rate on home loans and others; however it has not made changes in its PLR.

Now BOI has revised its rate in home loan up to Rs. 20lakh by waving 25 basis point, while in personal and auto loan it has cut 25-250 basis point depending upon the nature of the loan, announced D Krishnamurthy General Manager of BOI in Mumbai on Monday.

After revising the rate, now SBI will charge 2.50% below SBAR for five-year tenure floating home loans, 2.25% below SBAR for 10-15 years tenure and 2.0% below SBAR for 15-20 year loans from February 16, whereas the interest rate on above Rs.20 lakh, the charges would be 25 basis point higher in all specified terms.

On the other hand, the revised charges of BOI will be 9.75% for floating loans for 5-10 years tenure, 10% for 10-15 years and 10.25 percent for 15-20 years period. In the educational loan, BOI has also cut the interest rate by 0.50%. All these new rates will be effective from February 12.

The Apex bank, Reserve Bank of India has appraised the steps of SBI and BOI for reducing the loan rate despite of not getting any such direction from RBI. ‘These new rates would be beneficial for the banks and their customers’, as RBI admired.

The Central Bank (RBI) has not cut off any benchmark interest rate in its policy review in end-January, while Finance Minister P Chidambaram has also commended the steps of both the banks.

RBI is now expecting to other banks to follow the steps of SBI soon.

On the other hand, some major housing finance companies like HDFC housing finance and PNB Housing Finance too had reduced interest rate on housing loan by slashing 0.25% and 0.5% respectively.