Major public sector banks such as Bank of India, Bank of Baroda and Canara Bank have decided to lower their prime lending rate (PLR), following the State Bank of India's (SBI) decision to cut PLR. The PLR would be cut to 12.5% from 13.25% by these three banks and the new lending rates will be effective from January 1, 2009.

It should also be noted that the reduction in rate will also benefit banks' existing education loan, auto loan and home loan borrowers. Furthermore, the deposits rates will also be lowered by the banks from January by 50-100 basis points.

SBI lowered its PLR to 12.25%, on Saturday, which is the lowest PLR in the industry. Union Bank of India and Punjab National Bank were among the first banks to reduce PLR to 12.5%.

On the other hand, private banks are still charging as high as 15-17% to their prime borrowers. Since August 2008, the country's largest bank, ICICI had pegged its PLR at
17.25%. Senior officials from the ICICI Bank informed that they do see interest rate softening, but, declined to comment on when the bank will consider a revision in the lending rates.