Major lenders, including public sector Punjab National Bank, Bank of Baroda, ICICI Bank and Dena Bank today said that they will reduce their prime lending rate by 50 to 75 basis points with effect from 1 January 2009.

In a filing with the Bombay Stock Exchange, Punjab National Bank, the country's second largest public sector lender said it will also reduce interest rates on 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 1 January," PNB said.

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

PNB also announced a 100 basis point reduction in its peak deposit rate to 8.5 per cent for deposits of one year to less than three years.

This is the second reduction in deposit rates by PNB in one month. Earlier this month, the bank had reduced its peak deposit rate from 10.5 per cent to 9.50 per cent. 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.

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

Another public sector lender, Dena Bank, said it will cut benchmark lending rate by 75 basis points to 12.75 per cent following the liberal monetary policy announced by RBI earlier this month.

Effective 1 January, the bank's BPLR will stands reduced from 13.5 per cent to 12.75 per cent, Dena Bank said in a filing with the Bombay Stock Exchange.

Private sector lender ICICI said its housing, auto and personal loan customers will get their new year gift in the form of a cut in interest rates.

''We are looking at cutting interest rates very early in January for our housing and other loan customers,'' its CEO and managing director K V Kamath said, without elaborating.

The extent of the rate cut is being calibrated and would be announced soon, he said.

ICICI had earlier this month reduced home loan rates for new customers by up to 1.5 percentage points.

State Bank of India (SBI), the country's largest lender, had also announced a reduction in its prime lending rate by 75 basis points to 12.25 per cent with effect from 1 January. Home loan major HDFC Bank has also cut its prime lending rate by 50 basis points.