Loans of up to Rs 20 lakhs will have an interest rate of 10.25 per cent and the rates for loans above this level has been pegged at 11.25 per cent down from 11.75 per cent. The new rates would be effective from Monday.
"The advantage of a cut in retail prime lending rates (RPLR) will accrue to all the existing floating rate customers over a period of next three months based on their respective reset dates," HDFC said in a statement.
After Home Minister, P Chidambaram's announcement in the Parliament that he would persuade banks to reduce loans for existing home loan borrowers as well, the housing major took this decision.
"HDFC also decided to reduce the deposit rates by 50 basis points," the statement added.
HDFC Bank joint MD Renu Karnad said, "When we cut a PLR it means that loans which are existing today will also get the benefit. So we have dropped our retail PLR by half per cent which means all current borrowers will get the benefit. The new borrowers who are taking loans beginning Monday onwards for loans upto Rs 20 lakhs will get a further half per cent reduction. So if you take a loan on Monday which is up to Rs 20 lakhs - fresh loans and not refinancing loans - you will get it at 10.25 per cent and loans between Rs 20-75 lakhs will be at 11.25 per cent."
Public sector banks have already capped the interest rates at 8.5 per cent for loans up to Rs 5 lakhs to encourage low-income housing.
For middle-income loans of Rs 5-20 lakhs, the PSU banks would charge a maximum of 9.25 per cent. These rates would be reset only after five years.
The scheme by PSU banks is valid up to June 30, 2009. The state-run banks have also done away with processing fee and pre-payment charges for loans up to Rs 20 lakhs.
OneIndia News (With inputs from Agencies)