Loans to get cheaper as SBI cuts rate again

MUMBAI: There is good news for people repaying home loans. After going up for months, EMIs are set to come down. This follows a decision by four public sector banks, led by SBI, to cut their prime lending rates further by 0.25% to 0.50%. This means that people looking for fresh home and car loans can bargain for a better deal. The move, the second in less than 10 days, is also expected to make borrowing cheaper for businesses and spur economic growth. The decision follows a closed-door discussion held by the four banks last Saturday. SBI’s new PLR will be 12.25%, effective from February 27. Canara Bank, Bank of India and Union Bank have all pared their PLRs to 12.75%. According to industry analysts, this move was inevitable. Over the last couple of quarters, bank lending had dropped considerably after RBI raised interest rates in an attempt to contain inflation. The credit-to-deposit ratio, which was at a high of 90%, is now 55%. With borrowers shying away, banks are flush with funds. Bankers would like to have people and businesses borrow more because that will help the economy grow. Which is why, on January 29, while announcing the quarterly monetary policy review, the RBI governor had asked bankers to explore the possibility of reducing interest rates.