Following in the footsteps of the Reserve Bank of India, National Housing Bank on Wednesday slashed lending rates by 0.25 per cent to 6.85 per cent, and is targetting 150 per cent growth in loans disbursements at Rs 2,500 crore (Rs 25 billion).

The nodal bank for housing finance companies has reduced the fixed refinance rate to 6.85 per cent from 7.10 per cent while slashing the floating rate to 6.65 per cent from 6.90 per cent for best rated companies like HDFC, NHB officials told PTI in New Delhi.

The maximum rate at which NHB will lend funds to companies is now pegged down to a fixed 7.70 per cent and a floating rate of 7.50 per cent, they said.

In the case of rural areas, NHB has reduced the rate by 0.25 per cent to a fixed rate of 6.85 per cent and floating rate of 6.65 per cent for loans up to Rs 500,000.

NHB had reduced the refinance rate for rural areas by 2.0 per cent to 6.85 per cent in February 2003.

"The reduction in interest rates is expected to give a fillip to rural housing," an official release said.

The cut in refinance rate comes a month after RBI slashed its benchmark bank rate by 0.25 per cent to 6.0 per cent in April slack season Credit Policy.

With reduction in rates, NHB now targets a whopping 150 per cent rise in loan disbursement to Rs 2,500 crore (Rs 25 billion) this fiscal.

NHB's total loan disbursement stood at Rs 7,000 crore (Rs 70 billion) till June 2003.