Public sector lender Central Bank of India, which yesterday froze its home loan rates at 8 per cent, today entered into an arrangement with auto major Tata Motors for providing retail finance facilities to buyers of its passenger vehicles.

"In order to provide an added facility of car finance to its customers, Tata Motors has entered into an understanding with Central Bank of India for financing its range of passenger vehicles," Tata Motors said in a statement.

Under the arrangement, Central Bank would offer financing facilities for passenger vehicles of Tata Motors through its 3,500-odd branches as well as 329 sales outlets of the auto maker.

"This tie-up will provide a single window for both cars as well as car loans and will make car buying easier for customers," Tata Motors said.

Central Bank offers up to 85 per cent car financing on the on-road price of the vehicle, for a tenure ranging up to seven years, at a rate of 10.5 per cent for 36 months and at 11.5 per cent for a period over 36 months, the statement added.

Tata Motors has tied up car financing with another public sector lender, Corporation Bank, as well.

Close on the heels of the country's largest lender State Bank of India cutting its home finance rates, Central Bank of India also said it was freezing the interest rate for new home loans at eight per cent.

Central Bank expects an incremental growth of Rs1,000 crore over the next one year under the scheme, which will be applicable for all loans taken till 31 March, said executive director Ramnath Pradeep.

Central Bank also reduced the lending rate for housing loans up to Rs5 lakh by 0.5 per cent to eight per cent from tomorrow under a special package.

"The rate under this package will be fixed at eight per cent for a period of five years and will be reset after that," Pradeep said.

''Borrowers will also have the option of continuing with the fixed rate or switching over to the floating rate," he said.

Central Bank expects its loan portfolio to grow by 18 per cent from the current figure of Rs81,000 crore in the current fiscal. The public sector lender, however, said it expected its net interest margin to dip during the fiscal, which might shrink to 2.3 per cent as against 2.56 per cent at present.