LIC Housing Finance [Get Quote] has slashed the lending rates for new borrowers by 100 basis points across various loan categories. Home loans up to Rs 30 lakh (Rs 3 million), irrespective of the tenure, would now be cheaper by 100 bps at 8.75 per cent, while for loans above Rs 30 lakh (Rs 3 million), the rates are lower at 9.75 per cent as against 10.75 per cent earlier. The new rates are effective from February 1.

"Earlier, similar loans with a tenure of up to five years were charged 9.25 per cent and loans with a tenure between five and 20 years attracted 9.75 per cent. Now we have decided to aggregate the two schemes and charge same interest rate," LIC Housing Director and CEO R R Nair said. About 80 per cent of LICHF's loans fall under the Rs 30 lakh (Rs 3 million) category, with an average loan size at Rs 16 lakh (Rs 1.6 million).  

After the meeting with stand-in Finance Minister Pranab Mukherjee, many public sector bank chiefs, including UCO Bank [Get Quote] and Corporation Bank [Get Quote], had indicated a cut of 50-100 bps in lending rate.

State Bank of India [Get Quote] has already decided to offer home loans at 8 per cent for a year, irrespective of tenure and amount.

Though the present move would not benefit the existing borrowers, it would review the decision on April 1.

"We have passed on the benefit of incremental reduction in costs to the new borrowers. We always take a quarterly review of the lending rates for the existing borrowers, as we take into account the average cost of funds which is next due in April," Nair added.

On January 1, the company reduced lending rates for existing borrowers, which is presently in the range of 10.75-11.25 per cent, by 75 bps.

During the December quarter, the firm posted a 26.70 per cent rise in net profit at Rs 134.33 crore (about Rs 1.34 billion) and disbursed Rs 1,944 crore (Rs 19.44 billion). The firm's total borrowing in 2008-09 would go up to Rs 11,400 crore (Rs 114 billion) as compared to Rs 7,490 (Rs 74.90 billion) crore last year.