Canara Bank, which had reduced interest rates by 50 basis points on fresh home loans in October 2007, will cut floating interest rates by 25 basis points for new as well as existing borrowers from February 7.
The revised interest rates for housing loans up to Rs 20 lakh are 10-10.5 per cent and 10.25-10.75 per cent for loans above Rs 20 lakh. The bank's PLR stands at 13.25 per cent.
Canara Bank Chairman and Managing Director M B N Rao said, "The interest rates would have definitely softened if this quarter was in the middle of the year. There could be resistance (to lower PLR) because this is year-end and quarter-end."
The bank's net interest margin stands at 2.4 per cent. Mangalore-based Corporation Bank has decided to lower interest rates on personal and home loans by 50 basis points and on loans to small enterprises by 25 basis points from February 15 for existing as well as new borrowers.
Kolkata-based Allahabad Bank has also cut interest rates only for new borrowers by 50-100 basis points on home loans, loans for consumer durables, car loans and education loans from February 10.
The bank said that the decision to lower interest rates had been taken in keeping with the reduction in the cost of raising incremental funds, falling yields on government bonds and the overall market scenario.
"With the cut in lending rates, we hope to see an increase in retail advances such as home loans and consumer loans. I don't see any reason to reduce the PLR at the moment," said A C Mahajan, chairman and managing director, Allahabad Bank.
The bank has increased interest rates on short-term deposits from 61-180 days' maturity by 75 to 100 basis points to make these deposits more attractive even as it lowered interest rates on over two-year deposits by 25 basis points.
Meanwhile, UCO Bank will seek board approval on February 11 to revise its PLR by 25 basis points to 13.25 per cent even as United Bank of India (UBI) has hinted at a possible rate cut. "We would take a call on the PLR in the Asset Liability Committee in a few days' time," said P K Gupta, CMD, UBI.
The chairman maintained that they might lower the PLR taking the overall domestic situation into account.
In its third quarter review of the monetary policy, the Reserve Bank of India (RBI) had placed the onus of reducing interest rates on banks. RBI had observed that contrary to the comfortable liquidity situation, banks had not cut lending and deposit rates, which were at the elevated levels of the previous year.