Mumbai: State Bank of India (SBI) and Bank of India have announced reductions in lending rates of varying from 25 basis points to 250 basis points.

SBI, the country's largest lender today announced a 0.25 per cent reduction in its prime lending rate (PLR) to 12.50 per cent. The new rate takes effect on February 16.

Bank of India has reduced interest rates on retail loans by between 25 basis points and 250 basis points effective February 1, D Krishnamurthy, general manager of credit at the bank said.

BoI slashed rates on auto loans and personal loans by 250 basis points and for home loans of up to Rs20 lakh by 25 basis points.

The revised rate for home loans up to Rs20 lakh is 9.75 per cent. BoI has also reduced interest rates on educational loans by 100 basis points, he added.

However, the bank left its prime lending rate, or the rate at which it lends to its best borrowers, unchanged at 13.25 per cent.

The 0.25 percentage point reduction in PLR will make SBI loans cheaper for all category of borrowers, both corporate and retail loans, including housing and auto loans.

"Benchmark prime lending rate is revised downward by 0.25 per cent from 12.75 per cent to 12.50 per cent with effect from February 16," SBI said.

The decision comes close on the heels of up to one percentage point reduction in housing and consumer loan rates announced by Canara Bank and Allahabad Bank.

Housing finance major HDFC and PNB Housing Finance had also reduced interest rates. While HDFC reduced its RPLR by 0.25 per cent effective February 1, PNB Housing Finance slashed the rates by 0.5 per cent.

Meanwhile, another public sector lender, Indian Overseas Bank, is in line for a 0.25 per cent cut in select lending rates like loans for consumer goods, sources said. IOB, however, will wait till March to reduce deposit rates.

"The bank's asset-liabilities committee is likely to meet on Friday to take a call on lending rates," bank chairman and managing director S A Bhat told reporters in Chennai.

While the bank is likely to cut interest rate on select loans by at least 25 basis points, the bank would wait till March before deciding on deposit rate cuts, the sources said.

Finance minister P Chidambaram will meet chairmen of PSU banks in New Delhi tomorrow and may discuss the issue of interest rate with them.