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Mumbai/Kolkata, Nov. 3 Retail borrowers and India Inc may now be able to breathe a little easier. Public sector banks (PSBs), taking cue from last Saturday’s liquidity easing measures by the Reserve Bank of India (RBI), have started cutting their benchmark prime lending rates (BPLR). Union Bank of India today announced a 50 basis points cut in its BPLR to 13.5 per cent.

“We have reduced our BPLR by 50 basis points on account of the 350 basis points reduction in the Cash Reserve Ratio (CRR) effected by RBI. The bank does not earn anything on the funds impounded under CRR. Thanks to the CRR cut, we can now deploy the funds released at an average yield of 10.50 per cent,” said Mr M.V. Nair, Chairman and Managing Director, Union Bank of India.

Earlier, the bank had announced a downward revision in interest rates on home loans by 50 basis points with effect from October 21. The bank also plans to discontinue its 900-days fixed deposit scheme, which offers a high interest rate of 10.5 per cent, Mr Nair said.

Meanwhile, United Bank of India has announced a 25 basis points (0.25 per centage points) cut in its prime-lending rate effective from Monday, according to a press release issued by the bank.

The rate cut would be applicable to educational loan, housing loan, SMEs and other loans. The reduced lending rate would also be applicable for existing loan accounts, the release said.

“Further cut in the rate of interest on advances will be considered by the bank, commensurate with the decrease in the rate of deposits in the next week,” the release added.

Last week, Punjab National Bank cut its prime lending rate by 50 basis points to 13.5 per cent. Similarly, IDBI Bank announced a 50 basis points reduction in the interest rates on home loans to 11 per cent even as it enhanced the margin on home loans from 15 per cent to 20 per cent for loans up to Rs 30 lakh and to 25 per cent for loans over Rs 30 lakh. The bank effected a 50 basis points reduction in education loans.

Top two commercial banks — State Bank of India and ICICI Bank — are expected to review their lending and deposit rates over the next few days.

According to the Indian Banks’ Association Chief Executive, Mr K. Ramakrishnan, banks now have additional headroom to lend, following the CRR and repo rate cuts.

Meanwhile, the Union Finance Minister, Mr P. Chidambaram, is likely to ask public sector bank chiefs to cut their lending rates in a bid to boost productive credit to the industry.

The Minister is meeting the bank chiefs tomorrow.

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