ICICI Bank, the country's second lender, today announced a 1.5 percentage point reduction in interest rates on home loans, to 11.5 per cent from 13 per cent earlier, for all loans below Rs20 lakh.

The announcement was immediately after the Reserve Bank reduced its key rates and announced a package of measures for the recession-hit sectors like small industries, exports and real estate

The rates will be available for new loans and existing loans will continue to be charged at the earlier rates as the bank has made no change in its prime lending rate.

ICICI hopes the move to help revive demand for property. Several public sector banks have already announced a cut in their PLR.

Yes Bank cut its PLR by 0.50 percentage point, in response to RBI's decision to cut the repo and reverse repo rates. The reduction would be effective 8 December, the bank said.

"After our asset-liability committee meeting today, we have decided to reduce our PLR by 0.50 per cent," managing director and CEO Rana Kapoor said.

The bank's PLR accordingly stands reduced to 16.5 per cent from the earlier 17 per cent.

Punjab National Bank (PNB) and the largest public sector bank after the State Bank of India (SBI) had, on Friday indicated that they would reduce interest rates following leads from the RBI.

PNB slashed its benchmark prime lending rate (BPLR) by 100 basis points to 12.5 per cent effective 1 December. It will now stand reduced by another 50 basis points at 12 per cent.
 
PNB also cut its peak deposit rate to 9.5 per cent from 10.5 per cent for 1-2 years' fixed deposits.

Now that the RBI has signalled that interest rates are going down, the lending rates across banks should go down.

Meanwhile, SBI chairman O P Bhatt wanted the RBI to lower the statutory liquidity ratio (SLR) - the proportion of deposits that commercial banks must keep in reserve with the Reserve Bank to enable a reduction in lending rates.

The RBI has cut the cash reserve ratio, the level of cash that banks must keep in deposit with the Reserve Bank, by 350 basis points to 5.5 per cent since early October.