India's largest private lender, ICICI Bank has declared a 150 basis points cut in its home loans of less than Rs 20 lakh. The bank has reduced the interest rate from 13% to 11% for all the new housing loans.

The announcement came soon after the RBI reduced its key policy rates and declared a package of measures to enhance credit to the small industries and real estate sector.

A spokesperson from ICICI said, "Priority sector lending has always been one of our key focus areas and we have a differential offering for these customers. This is our pricing to promote the priority segment and offer affordable housing."

The new rate of the bank is applicable to only the new customers where as the existing customers will continue to be charged earlier rates as the bank has not changed its prime lending rate (PLR).

This is one of the biggest cuts implemented by ICICI bank at one go and it is likely to help the customers in reducing their EMI burden. For instance on a loan of Rs 20 lakh for 20 years, the EMI would be cheaper by Rs 2,102 against the earlier rate.

This is the first time ICICI has announced a cut in its lending rate after the RBI has been reducing its policy rates - repo rate and CRR - since October. The Central bank has reduced the CRR by 350 basis points to 5.5% and repo rate by 250 basis points to 6.5%.

The cut in the home loan rates by ICICI is expected to help in the renewal of property demand that has been severely hit by the slowdown.

The rate cut is effective from Monday, December 8th.