Allahabad Bank & Canara Bank cut loan rates significantly

Initial Speculations were about Bank of Baroda, Bank of Maharashtra and Union bank going for a rate cut in home loans floating interest rates. But it was Allahabad Bank and Canara Bank who has taken everyone by surprise by suddenly declaring a significant rate cut in their various loan offerings.

The rate cut for Allahabad bank will be effective from from February 10 and the rate cut for Canara bank will be effective from February 7.

Another good news is that the rate cuts will be effective for both the existing and the new customers, contrary to what HDFC had to offer – HDFC home loan rate cuts only for existing customers. Another significant part is that these nationalized banks have deducted the rates for almost all kinds of loans unlike HDFC doing it only for home loan. Moreover, HDFC rate cut was only 25 basis points (or 0.25%), while Allahabad Bank and Canara Bank have gone for a rate cut varying from 0.25% to 1% across different loan segments. Loans like education loans are expected the get cheaper by as much as 1%.

Here are the news items from the sources:

(http://in.reuters.com/article/businessNews/idINIndia-31778720080205) - State-run Allahabad Bank said on Tuesday it had reduced its interest rates on retail lending by 50-100 basis points following the reduction in its cost of incremental funds.
The rates on deposits having a tenure of 2-10 years have been reduced by 25 basis points while rates for deposits of 61-180 days have been raised by 75-100 basis points, it said in a statement.
Shares in the bank ended 4.65 percent up at 121.45 rupees in the Mumbai market.

(http://www.thehindubusinessline.com/2008/02/06/stories/2008020652030600.htm):
Canara Bank reduced its home loan rates by 25 basis points across the board. A bank release said the reduction would take effect from February 7. The reduction would be applicable for existing floating rate borrowers as well, the release added.
The revised rates for loans up to Rs 20 lakh for five years would be 10 per cent. The rates for loans up to 10 years would be 10.25 per cent and 10.50 per cent for 25 years, the release said. For loans above 20 lakh, the rates would be 10.25 per cent, 10.50 per cent and 10.75 per cent, the release added.

Other big banks like SBI and ICICI bank are still silent. I do not expect them to keep their stand for long. Hopefully they will also have to give into the market pressure and reduce their home loan rates. Let’s hope for the best

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