The Hindu Business Line : Union Bank, Bank of India cut lending rates by 50 bps

Chennai, Feb. 20 Two public sector banks, Bank of India and Union Bank of India, today announced reduction in their benchmark prime lending rates (BPLR).

Both banks have pared their BPLR from 13.25 per cent to 12.75 per cent.

However, while Union Bank last reduced interest rates in April 2007, this is Bank of India’s second rate cut within this month.

With a total loan book of Rs 1,06,000 crore, Bank of India is the second largest lender after the State Bank of India.

However, domestic advances amount to about Rs 83,500 crore. Of this, about Rs 45,000 crore are loans for commercial and industrial sectors, which will benefit by the rate cut. Another Rs 10,000 crore are retail loans, comprising loans for education (Rs 1,000 crore), housing (Rs 5,500 crore), personal (Rs 950 crore), vehicle (Rs 950 crore) and miscellaneous (Rs 450 crore).

These segments also benefit by this rate cut to varying degrees. Interest rates for categories other than education and housing have been pared by 3 percentage points.

Loans to priority sector (about Rs 10,000 crore), those not linked to BPLR and lendings abroad will not be affected by these rate cuts.

In a statement, Bank of India’s Chairman and Managing Director, Mr T.S. Narayanasami has said that the bank heeded a signal given by the Reserve Bank of India to cut rates to stimulate credit growth.

Deposit rates

Union Bank of India has also cut rates on 3-year term deposits by 50 basis points from 8.75 per cent to 8.25 per cent.

Bank of India, Mr Narayanasami said, will take a view on deposit rates towards the end of March. “We need resources to lend,” he said. The bank pays 9 per cent on three year deposits.

Canara Bank drops PLR by 25 bps

Our Bangalore Bureau reports: Canara Bank has dropped its benchmark prime lending rate for the second time in a fortnight by 25 basis points.

A bank release said that the reduced rate would take effect from February 25 .

The reduction brings the rate to 12.75 per cent or 50 basis points above SBI’s prime lending rate.

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