India's largest lender, State Bank of India has finally taken a decision on rate cut and thereby reduced its prime lending rate (PLR) by 75 basis points on Thursday. SBI has also decided to cut both its deposit and lending rate.

The PLR has been reduced from 13.75% to13%. "SBI has cut its PLR by 75 basis points with effect from November 10," said O P Bhatt, Chairman of SBI.

On the deposit front, the bank has made a reduction of 50 basis points across maturities ranging from 91 days up to 5 years while deposits with above 5 years tenure will see a deduction of 25 basis points. The revision in the deposit rate will come into effect from December 1st stated a bank statement.

"We are also examining a cut in home loan rates by half a per cent. This is bound to happen because 80 to 90 percent of the housing loans in India are taken by the low- and mid-income sectors. Even a 25 percent fluctuation in home loan EMIs makes a huge difference for them. There could be corrections in the real estate prices as well, which could spur demand for home loans in the coming months," said Bhatt.

Over the past few months SBI's home loan market has increased from 17.25% in March to 18% in September. The bank has also kept on in its lending even amid the financial crisis.

SBI's credit-deposit ratio is also maintained at 74% at the current situation. Bhatt said, "Over the last two months our deposits have been growing at Rs 1,000 crore a day and we have not stopped lending to any sector. We are yet to decide the time for reducing deposit rates, but we are examining it."

The Chairman however feels that in coming month, there can be some liquidity pressure as the government borrowings may increase.

Even Oriental Bank of Commerce (OBC) and Indian Overseas Bank (IOB) have kept in line with SBI's decision and cut their PLRs by 75 basis points to 13.25 per cent with immediate effect.