State Bank of India and Small Industries Development Bank of India (Sidbi) announced a cut in interest rates for the new loans to micro, small and medium enterprises by up to one per cent. Interest rate reduction came after the announcement of a special package by the RBI and Association of Bankers. The new rates would be effective immediately. Small scale industry had been demanding financial package from the government to push demand in the sector which is adversely impacted by the ongoing financial crisis.

Now, small firms with working capital limits of up to Rs 10 crore can avail benefit of interest rate reduction from these banks. SBI said in a press release, "With this reduction, the micro enterprises will be able to avail working capital finance at as low as 10.25 per cent."

Small Industries Development Bank of India cut the benchmark prime lending rates by 150 basis points to 12.5 percent in lines with RBI's move to provide financial relief to the small scale industry. The bank would provide funds at sub-PLR rates. Chairman and Managing Director of SIDBI, RM Malla said, "Thanks to the help from the government and RBI, our cost of funds will come down and we will pass on the benefits to the borrowers."

Allahabad Bank has also revised its interest rates for all existing and new loans to micro industries. Small and medium enterprises with capital exposure of up to Rs 10 crore can avail 50 point cut in interest rates.