Punjab National Bank [Get Quote] and Bank of Baroda [Get Quote] said on Monday they will reduce their prime lending rate by 50 and 75 basis points, respectively with effect from January 1.

Besides, PNB announced a reduction in its peak deposit rate by 100 basis points to 8.5 per cent for deposits of one year to less than three years beginning new year, the state-run lender said in a filing to the Bombay Stock Exchange.

Earlier this month, the bank had reduced its peak deposit rate to 9.50 per cent from 10.5 per cent.

In a separate regulatory filing to the BSE, Bank of Baroda said, "The bank has decided to reduce its benchmark prime lending rate by 75 basis points from existing 13.25 per cent to 12.50 per cent with effect from January 1, 2009."

The BPLR of PNB would stand reduced to 12 per cent, from the existing 12.50 per cent, effective from January 1.

With the revision, PNB's deposits having maturities of 46 days and above will attract an interest rate of 1.25 per cent from the earlier 1.50 per cent, the filing said.

Besides, the country's second largest private sector lender has also reduced interest rates on various retail lending schemes such as floating rate housing loans, car and education loans by 50 bps.

"The interest rates on fixed rate housing loans have been reduced by up to 175 basis points with effect from January 1," PNB added.

Further, the bank has introduced a housing loan scheme -- PNB Special Housing Loan Scheme -- for new accounts from January 1, 2009, till June 30, 2009.

Under the fixed housing loan of up to Rs 500,000 for maximum period of 20 years, PNB would charge interest rate at 8.5 per cent.

Also fixed rate housing loans of above Rs 500,000 to Rs 20 lakhs (Rs 2 million) for a maximum period of up to 20 years would attract interest of up to 9.25 per cent.

"The interest rate will be subjected to reset on July 1, 2014, for the scheme," PNB added.

The rate cut came shortly after State Bank of India [Get Quote] announced a 0.75 percentage point cut in its prime lending rate and a 0.25-1 percentage point reduction in deposit rates from January 1.

Also, other leading state-owned lender Union Bank of India [Get Quote] reduced its deposit rates and Canara Bank [Get Quote] announced reductions in their deposit and MSME lending rates.

Shares of PNB were trading at Rs 498.65, down 1.69 per cent and BOB shares were down 2.10 per cent at Rs 262.90 on BSE.