Joining the rate cut bonanza , Bangalore- based public sector lender Canara Bank today reduced its benchmark prime lending rate (BPLR) by 75 basis points from 13.25 per cent to 12.50 per cent with effect from January 1, 2009. The new rates are also applicable to micro, small and medium enterprises, and housing sector borrowers, which are currently linked to BPLR, the bank said.
The state-owned lender has also lowered rates on auto loans by 50 basis points from 12.50 per cent to 12 per cent.
The series of cuts in key lending rates by the central bank over the past two months has started bearing fruit, as almost all public and private sector lenders have finally joined the bandwagon of lowering rates in the new year.
Since the central bank's mid-term review on October 24, while the public sector banks responded quickly by lowering the benchmark lending rates by over 100 basis points, the private sector players mostly refrained from reducing rates, arguing that the cost of funds were still high. The public sector banks have capped the interest rates at 8.5 per cent for loans up to Rs 5 lakh to encourage low-income housing, and up to 9.25 per cent for middle-income loans of Rs 5-20 lakh. The country's largest housing finance company, HDFC reduced its retail lending rates by 50 basis points last week. HDFC customers can now avail of cheaper loans.
Taking a cue from a fall in cost of funds, the housing finance arm of Life Insurance Corporation of India, LIC Housing Finance today said it would reduce home loan rates by up to 75 basis points for its existing customers.
The company said that the reduction in rates would be applicable for customers whose equated monthly installment is due on January 1 and will be payable on February1. However, the new home loan borrowers at LIC Housing would avail loans of up to Rs 20 lakh at 9.25-9.75 per cent.
Following suit, private sector lender Bank of Rajasthan, too has reduced its BPLR by 50 bps from 16 per cent to 15.5 per cent from January 1. The effective interest rate would go down by half a percentage point. The bank reduced its home loan rates by 150 basis points with effect from December 22.