Mumbai, Nov. 6: State Bank of India today led a pack of banks in slashing a key lending rate by 0.75 percentage point, clearing the way for lower home loan instalments.

The home loan relief hope came with a sting: deposits will earn less, too. Home loan rates are expected to come down from November 10 and that on deposits from December 1.

The reduction in benchmark prime lending rates —used as a basis to price other types of credit — comes two days after banks promised the finance minister a cut.

Based on today’s reduction, the EMI of an existing floating-rate home loan of Rs 1 lakh taken for 20 years could fall by Rs 50. The relief could vary, based on banks and their conditions. New loans are expected to turn cheaper, too, as their costs are tied to the prime lending rate.

SBI chairman Om Prakash Bhatt said home loan rates would come down but did not specify by how much. Auto loans, unlike personal loans, are also tied to the prime rate and are expected to come down, though no specific announcement was made today.

Private institutions like HDFC and ICICI Bank seemed to be holding out, though. An HDFC source said a decision was likely next week. ICICI Bank joint managing director Chanda Kochhar said she was “watching” rates.

The State Bank Advance Rate, the bank’s prime lending rate, now stands at 13 per cent, effective from November 10. Based on this, the effective rate on its existing floating-rate home loan of Rs 30 lakh could be 9.75 per cent for 5 years, 10 per cent for 5 to 15 years and 10.25 per cent for loans above 15 years and up to 25 years.

Today’s cut is the largest since interest rates started rising. Reductions in the past have been in the nature of festival offers, a temporary bait banks use.

As a result of the cuts in lending rates, SBI said it would pay 0.5 percentage point less on deposits of 91 days to 5 years and 0.25 percentage point less on those above 5 years.

Bank of India, Indian Overseas Bank, Bank of Baroda, Oriental Bank of Commerce and Corporation Bank also cut their benchmark lending rates.