Mumbai: Heeding to finance ministry's call to cut interest rates, the Industrial Development Bank of India (IDBI) has cut home loan rates by up to 1 per cent for new customers effective today.
 
''We expect the housing loan demand to pick up rapidly in the coming months as government's fiscal stimulus packages will help regain the consumer confidence,'' IDBI Bank's head of personal banking, C S Jain said.

The floating rate for home loans up to Rs20 lakh has been reduced by 100 basis points (bps), while for loans above Rs20 lakh the reduction will be by 50 bps, the bank said.

With this, IDBI Bank's customers can avail home loans up to Rs20 lakh for 9.75 per cent per annum and loans above Rs20 lakh at 10.25 per cent.

In terms of fresh housing loan disbursals, IDBI Bank is the third largest in the country and expects to improve its performance with the rate cuts, Jain said.

The bank has also reduced its deposit rates across certain maturities by 25-50 bps effective Friday.

With the reduction in deposit rates, IDBI Bank's deposits having 1,100 days maturity will now carry a rate of 9.25 per cent as against 9.5 per cent earlier.

Similarly, deposits up to Rs15 lakh and having a tenure of three years to 10 years will now offer an interest rate of 8.25 per cent (8.75 per cent) while those above Rs15lakh will have a rate of 8.5 per cent against 9 per cent till now, IDBI Bank said.

Meanwhile, leading state-owned lenders, such as State Bank of India, Punjab National Bank and Union Bank of India had revised downwards their lending rates to pass on the benefits of recent RBI policy to borrowers.

On Saturday, a day after RBI raised the issue of interest rate cuts in its meeting with bank chiefs, Punjab National Bank and Union Bank of India had cut their lending rates by 50-150 bps.

Recently, SBI introduced an 8-per cent home loan rate offer, valid for a year, for new borrowers. Existing home loan borrower shifting from another lender to SBI would also be treated as a new borrower, and thus avail the lower rate of interest.

While all banks are offering lower rates for new loans, rates for existing borrowers have dropped only marginally despite RBI cutting repo rate, at which the central bank lends to commercial banks, by 250 bps in the past four months to 5.5 per cent.

There were reports that home loan borrowers are increasingly considering shifting loans from private sector mortgage lenders to public sector banks (PSBs) to take advantage of the wide difference in interest (See: Few takers for 'cheap' home loans)

Last month, IDBI reported third quarter net profit of Rs223 crore, up 27 per cent from Rs176 crore in Q3FY08. Deposits and advances increased by 38 per cent and 42 per cent to Rs80,803 crore and Rs92,192 crore, respectively. Net interest income for the quarter was up by 135 per cent.