Auto and home loan seekers can expect further cut in the lending rates with the public sector banks gearing up for the second round of cut in the benchmark lending rates by up to 50 basis points during December.
Banks have already started reducing the deposit rates and with more liquidity infusion by the Reserve Bank of India, there would be more scope for cutting lending rates to spur demand, said a senior banker.
Banks have started assessing asset liability situation in the light of the cuts in deposit rate coming into effect from next week, he said.
Another senior banker said, further cut in benchmark prime lending rate (PLR) in between 25-50 basis points by various banks is likely to be announced in December.
In the first round, several public sector banks have reduced their PLR by 75 basis points following an appeal by the Finance Minister P Chidambaram earlier in the month.
Chidambaram had said lowering of lending rates by the state-owned banks would also put competitive pressure on their private sector counterparts to announce similar cuts.
"Competition from public sector banks will force private sector banks to reduce their lending rates sooner than later. It will happen sooner than later," Chidambaram had said.
Taking the lead, country's second largest lender Punjab National Bank has already decided to reduce PLR by 100 basis points to 12.5 per cent, which would automatically reduce PLR-linked loans by the same margin.
The revised PLR will be applicable to all existing and new accounts, PNB said, adding that the decision to reduce rate was taken "in response to monetary measures taken by RBI in November such as reduction of repo rate from 8 to 7.5 per cent, cash reserve ratio from 6 to 5.5 per cent and statutory liquidity ratio from 25 to 24 per cent."
