"The floating rate Prime Lending Rate (PLR)-linked refinance portfolio of NHB will now be repriced at 0.25 per cent less," the regulator said in a statement.
Earlier in the day, RBI reduced short-term lending rate called repo by 0.25 per cent to 7.75 per cent and cash reserve ratio (CRR) by similar margin to 4 per cent, releasing Rs 18,000 crore primary liquidity into the system.
Also the NHB, decided to reduce interest rate on special refinance scheme by 0.25 per cent.
The refinance rate has now been reduced to 8.25 per cent from 8.50 per cent in respect of loan up to Rs 5 lakh and 8.50 per cent from 8.75 per cent per annum for loans up to Rs 10 lakh.
The scheme provides long term fixed rate refinance at affordable rates of interest for construction or purchase of houses in urban areas to people in the lower income segments, including those engaged in the informal sector, it said.
There is need for creating a long-term fixed interest rate market for housing, particularly for the low and moderate income households who may not be able to absorb the volatilities in the interest rates under the floating regime, it added.
Under the scheme, it said, NHB provides refinance assistance to Primary Lending Institutions (banks, HFCs and other lending institutions in cooperative sector) at lower rates for long term in respect of their housing loan portfolio up to Rs 10 lakh extended to the target segments.
Refinance is extended for tenures ranging between five and 15 years at fixed rates.
In order to support the various measures of Government of India and RBI to promote affordable housing finance for EWS and LIG segments in urban areas, the bank has reduced interest
rates under its Special Refinance Scheme for Urban Low Income Housing (LIH).
It has also launched a dedicated low income housing refinance scheme at concessional lending rates in its Silver Jubilee Year.
Under the scheme, NHB provides refinance at fixed rate for up to 15 years, which will allow lenders to extend long term fixed rate loans to the borrowers in this income segment.
The scheme provides an incentive to the lenders to pass on the benefit to the borrowers, so that they are hedged from the volatilities in interest rate under the floating regime, NHB Chairman and Managing Director R V Verma said.
The Rate cut and CRR cut put together is a very healthy policy action from the RBI. Now, the Banks are also responding to the cut in rates and CRR by similar reductions. The FM also has indicated matching government action to curb inflation. We can therefore expect the economy to move towards an upward path in the months ahead.