Now, PSU banks cut interest rates

[sukishan]

Taking a cue from the Reserve Bank of India, state-run Canara Bank, Corporation Bank and Allahabad Bank cut lending rates on Tuesday, while other public sector players are expected to followith similar moves over the next few days.

Allahabad Bank has also revised interest rates on fixed deposits of certain maturities by one percentage point. Lending rates were cut by 50-100 basis points for housing loan, loans for consumer durables, car loans and education loans.

The country's third largest public sector lender Canara Bank cut interest rates on existing and new housing loans by 25 basis points. The cut will be effective from Friday. The cut in interest rate is irrespective of loan amount and for all tenures up to 25 years, the bank said in a statement.

The revised rates for loans up to Rs 20 lakh will be 10%for five year tenure, 10.25% for 10 years and 10.5%for loans of 10-25 years. Processing charges on home loans has also been reduced by 50 per cent up to March three, 2008.


Corporation Bank's rate cut of 25 basis points was, however, directed at small enterprises, the bank said.


Tuesday's rate cuts were the first by public sector banks after last week's move by HDFC after the RBI indicated that banks needed to move ahead with rate cuts instead of parking funds in safe instruments like government bonds.


Last month, finance minister P Chidambaram too had indicated his desire to public sector bank chiefs to cut both lending and borrowing rates but the bankers opted to wait for cues from RBI before following the government's wish.

Chidambaram had said that banks needed to cut rates for lending to sectors like consumer goods which had seen sluggish sales in recent months, pulling down overall industrial sector output. It was not clear if the finance ministry had asked banks to follow HDFC and effect rate cuts.