National Housing Bank slashes its lending rate by 0.5% to 10%

National Housing Bank (NHB) has cut its lending rate by 0.5 per cent 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 per cent to 10 per cent 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 per cent of the resources raised by housing finance companies and in some cases the share is as high as 60 per cent.

Last fiscal, the NHB disbursed loan to the tune of Rs 14,454 crore registering an increase of 20 per cent over the last fiscal.

The loan book size of the bank increased by about 26 per cent 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 per cent last week.

With the reduction, the base rate of the bank came down to 9.75 per cent, the lowest in the banking sector.

The decision came a day after the RBI cut Cash Reserve Ratio (CRR) by 0.25 per cent to 4.5 per cent inducting Rs 17,000 crore into the system.