State-run Punjab National Bank (PNB) has announced a cut in its prime lending rate (PLR) by 50 basis points. The bank ha reduced the PLR to 11.5% with effect from February 1st, 2009.

The reduction is likely to cheapen the home and auto loans disbursed by the bank. Amongst the sectors that are likely to be benefited by this cut are automobiles, home loans, education loans, agriculture and micro, small and medium enterprises (SME). "All loans related to our benchmark prime lending rates would get cheaper," said PNB's Chairman, K C Chakrabarty.

"From February 1, we have decided to cut the Prime Lending Rate (PLR) by 50 basis points, thereby making home, car, education, and personal loans cheaper. With this revision, the fixed rate housing loan would range from 9.25 percent to 11 percent and floating rate loans from 9 percent to 10.25 percent, depending on tenors and amounts. The revised interest rates on floating housing loan will be applicable for existing and new customers," he added.

At the same time, deposit rates offered by the bank are also going to be revised downwards. The deposit rates would come down by 25 to 50 basis points across various maturities with effect from next month, said Mr. Chakrabarty. The peak deposit rate will be cut from 8.5% for 1-3 years to 8% for 1-5 years.

Meanwhile the bank has also released its third quarter report which registered a growth of 86% in net profit at Rs 1,006 crore as compared to Rs 541 crore for the corresponding quarter a year ago. In addition, the bank's income rose by 51.47% to Rs 6,239.91 crore during the third quarter, from Rs 4,119.57 crore during the same period in the last fiscal.

The reports suggest that PNB has become the first bank in the industry to make a profit of over Rs 1,000 crore in a single quarter.