It seems that the series of cut in CRR has started showing its effect.

State-run, Punjab National Bank has decided to slash lending rate on housing, car and education loans after the announcement of third cut in CRR.

PNB is the first lender to declare a reduction in the interest rates. Chairman and Managing Director of PNB, K.C. Chakrabarty said: ‘Our bank is the first bank to reduce interest rate on the above loans to pass the CRR cut benefits to our customers.'

The bank has announced a 50 basis point cut in housing, auto and education loans that will come into effect from October 16th.

Currently, PNB charges 10.5-11% on home loans which will come down by 0.5%. "We are cutting the loan rate to bring cheers to bank customers in the festival season," said Chakrabarty.

All existing and new retail customers of PNB will avail the benefit of this rate cut.

Further, PNB had also increased interest rates on term deposits in various time slabs with high rate of 10.50% (11% for senior citizens) to pay higher rate of interest to depositors.

The above measures of reduction in interest rates on retail loans and increase in rate of interest on term deposits were announced by the bank on two consecutive days.

Bankers have welcomed RBI's move to cut CRR but said that the softening of interest rates will take some time. They feel that lenders such as PNB and State Bank of India, which had raised interest rates by 100 basis points three months ago, might look at a reduction now. However other like HDFC Bank and Standard Chartered Bank would not lower their rates. ICICI Bank is expected to take a decision only after assessing the cost of funds.

PNB has a retail portfolio of around Rs15,000 crore.