The Reserve Bank of India might have decided against lowering the bank rate, but half-a-dozen banks and housing finance companies are contemplating a 25-50 basis point cut in interest rates on housing loans.
The list includes Vijaya Bank, Punjab National Bank, Canara Bank and ICICI Bank. Indian Overseas Bank today sent notices to its branches informing them of a 25 basis points (0.25 per cent) reduction in interest rates on housing loans, effective from November 1.
While Canara Bank is contemplating a reduction of 25 basis points, Vijaya Bank proposes to realign interest rates for loans with over 5 years tenure.
"We are likely to make some adjustments in our interest rates in the next 7-10 days as per the requirements of the market. We might decrease our rates by about 25-50 basis points," PNB Housing managing director VK Sood said.
ICICI Bank chief operating officer Rajiv Sabharwal said, "We are looking at our cost of funds and will take a decision within the next week."
Bank sources, however, said ICICI Bank was considering a rate cut, provided the costs permitted it to do so. A large number of banks and housing finance companies were waiting for the credit policy announcement before effecting changes in their interest rate structures.
While some bankers like IOB Chairman SC Gupta said interest rates on other loan segments were likely to remain stable for the next couple of months, others admitted they were reducing interest rates because of intense competition.
"We offer the cheapest housing loans in the five-year tenure bracket, but in line with our aim of remaining the most competitive bank in all tenures, we would realign interest rates," Vijaya Bank chief M S Kapur said.
The move follows ABN Amro Bank's introductory offer of housing loans at 6 per cent interest rate in the first year, followed by 6.5 per cent in the second year.
Housing finance companies like HDFC and DHFL Vysya Housing have already come out with reduced interest rate offers.