Tags: RBI , SBI , ICICI , HDFC , UCO bank , Mumbai

Mumbai, Dec 6: Housing, retail and corporate loans will get cheaper as banks will cut lending rates in a few days in response to the RBI's move to lower key short-term lending and borrowing rates by 100 basis points.

Both lending and deposit rates would be cut, Punjab National Bank Chairman and Managing Director K C Chakrabarty told reporters.

"We have reduced the Benchmark Prime Lending Rate (BPLR) as a proactive measure. We are committed to doing so on a continuous basis as and when we feel it is necessary and have the capability to do it," he said.

PNB has the lowest PLR among all banks.

Chakrabarty said PNB will review the asset-liability situation next month to take a view on cutting interest rates further.

Banks that have not cut rates will do so immediately, he said.

Effective December 1, the repo rate will come down to 6.5 per cent while the reverse repo will decline to 5 per cent.

ICICI Bank Joint Managing Director Chanda Kochhar said that policy action is a signal. Interest rates will come down.

When rate cuts will take place and by how much would depend the credit position of banks, she said, adding, the rate cuts would follow cut in deposit rates.

SBI Chairman O P Bhatt had said that his bank was waiting from a signal from the Reserve Bank to take a view on interest rates.

"Currently, the consensus is that the interest rate must move down and efforts are being made in that direction," Bhatt said. Last month, country's largest lender SBI reduced the benchmark prime lending rate (PLR) by 75 basis points to 13 per cent.

It is expected that the banks would further reduce the lending and deposit rates after RBI's fresh monetary measures.

"Repo rate cut immediately means cut in deposit rates. I think that we have to give it some cooling off period and then see how the rate moves," Kochhar said.

But this is a truly strong signal, she said, adding, liquidity is adequate in the system and the rate should kind of start moving southward.

UCO Bank Chairman and MD S K Goel said that the bank is planning to cut the deposit rate by 50 basis points beginning next month.

Subsequently, we will cut the benchmark prime lending rate by 50 basis points to 12.5 per cent.

Currently, the PLRs of the most of public sector lenders are around 13 per cent. It is expected that the PLR would come down to 12.50 per cent by the end of 2008.

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