Auto, home and corporate loans will become cheaper with banks, led by market leader State Bank of India (SBI), lowering the lending rates by up to 0.50 per cent in response to the easy money policy of the Reserve Bank.
While the SBI has reduced the lending rate by a marginal 0.05 per cent, private sector HDFC Bank and Federal Bank announced reduction in a few segments like auto loans to the tune of 0.25-0.50 per cent.
Yesterday, public sector IDBI Bank and Royal Bank of Scotland (RBS) had reduced lending rates by 0.25 per cent and 0.75 per cent respectively.
The lowering of the interest rates follows the decision of the RBI to cut key benchmark lending (repo) rate by 0.25 per cent and deciding to inject additional liquidity of Rs 18,000 crore by a similar cut in Cash Reserve Ratio (CRR).
With the reduction, SBI's base rate or the minimum lending rate will now go down to 9.70 per cent from 9.75 per cent effective February 4.
"Through this reduction, we are passing on a little more than what we gain through the rate cut by the RBI," a senior SBI official said after a meeting of the asset liability committee of the bank.
HDFC Bank has lowered interest rate on car and two-wheeler loans by 0.25 per cent and 0.5 per cent respectively.
On commercial vehicles, the interest rates would be reduced by 0.25 per cent, a official said adding that the new rates would be effective from February 1. Mumbai-based HDFC Bank currently offers car loans between 10.75 per cent and 11.75 per cent. Post rate cut, the range would be 10.5-11.5 per cent for repayment period between 36 and 60 months.
Accordingly, interest rate on two-wheeler loans would be adjusted to between 19.25 per cent to 22.25 per cent.
With regard to commercial vehicles, the rate on heavy commercial vehicle will be down by 0.25 per cent to 11 per cent while rate for light commercial vehicle will get reduced to 13.75 per cent from existing 14 per cent.
The auto loan portfolio of the bank currently stands at about Rs 33,000 crore. The