New Delhi: National Housing Bank (NHB) has cut its lending rate by 0.5 percent a step that will result in reduction of cost for mortgage firms like LICHF and HDFC.
The Prime Lending Rate (PLR) has been decreased from 10.5 percent to 10 percent with immediate effect, NHB Chairman and Managing Director R V Verma said.
"The decision has been taken keeping in view market condition and also the need for supporting the industry and individual home buyer," he said.
It will directly benefit all floating rate loans linked to PLR, he said, adding, it should further spur demand for individual housing loan.
NHB directly lend to housing finance companies as well as provide refinance to entities related to the development of housing.
On an average, NHB accounts for 25-30 percent of the resources raised by housing finance companies and in some cases the share is as high as 60 percent.
Last fiscal, the NHB disbursed loan to the tune of Rs 14,454 crore registering an increase of 20 percent over the last fiscal.
The loan book size of the bank increased by about 26 percent in 2011-12 to Rs 28,490 crore as against Rs 22,543 crore in the previous fiscal.
Following the CRR cut by the Reserve Bank of India, country's largest bank State Bank of India (SBI) reduced the minimum lending rate by 0.25 percent last week.
With the reduction, the base rate of the bank came down to 9.75 percent, the lowest in the banking sector.
The decision came a day after the RBI cut Cash Reserve Ratio (CRR) by 0.25 percent to 4.5 percent inducting Rs 17,000 crore into the system.