Shortly after the Reserve Bank of India cut its signaling rates and the announcement of stimulus package, leading lenders HDFC Bank [Get Quote] and Union Bank of India [Get Quote] on Monday reduced their benchmark prime lending rates (PLR).

While HDFC Bank, the second largest privately owned lender in the country, cut its rates in two tranches to 16 per cent, leading state-owned lender, Union Bank effected a 0.75 per cent reduction in the PLR.

Union Bank, which reduced its PLR to 12.5 per cent, said the bank has effected the cut "in order to ensure credit to productive sectors at lower rates for sustaining growth momentum."

The cut in PLR will be applicable to both the existing and new customers of the bank and will be applicable to all PLR related portfolios, banks said in different press statements on Monday.

"The drop in the BPLR is pursuant to the reduction in the bank's incremental cost of funds," HDFC Bank's executive director Paresh Sukthankar said.

While Union Bank has revised PLR with immediate effect, HDFC Bank said the reduction would be implemented in two tranches-December 15 and January 1.

In order to further ease the liquidity situation and propel growth, the Reserve Bank had announced a slew of measures on Saturday including one per cent cut in repo, reverse repo rate each, which was followed by fiscal stimulus measures by the government.

Earlier, new-age private sector lender, Yes Bank [Get Quote] had announced a 0.5 per cent reduction in its PLR to 16.5 per cent on Saturday.

The cut in Union Bank's PLR will be applicable to all existing and new customers and for all portfolios related with the PLR, the bank said.

With Monday's cut, Union Bank has effected a 1.5 per cent reduction in its prime lending rates within 35 days responding to the policy signals of the banking regulator, the bank said.

It had cut the PLR, along with other major public sector banks, by 0.75 per cent to 13.25 per cent last month. The bank had also reduced its home-loan rates recently.

Country's largest private sector lender, ICICI Bank [Get Quote], has also reduced its interest rate for new home loans of Rs 20-lakh (Rs 2 million) and below to 11.5 per cent last week.

According to banking industry sources, more banks are likely to review their lending rates in the days ahead.