IDBI Bank is set to cut interest rates on housing loans by around 50 basis points. The rate cut, which is expected to be announced next week, is not a reaction to the recent rate cut announced by State Bank of India, but follows the reduction in rates a month back by ICICI Bank, IDBI Bank officials said.
"We are trying to realign our rates with those offered by players whom we deem to be our competitors," they said.
The new generation private sector bank deems Citibank, Stanchart and ICICI Bank its competitors. With ICICI Bank having reduced its interest rates on housing loans a month back to 10.5 per cent, IDBI Bank intends to follow suit.
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Further reduction in interest rates will help IDBI Bank garner a larger share of the market, as it has started propagating its strategy to refinance old loans taken from public sector banks and housing finance companies.
"Close to 25 per cent of our monthly volumes come from customers shifting from other banks," Kumar Subramaniankumar, head of operations at IDBI Bank, said.
IDBI Bank has grown its housing loan portfolio by 100 per cent since March this year, he added. Banks are better placed to reduce their rates as the cost of funds have fallen since most banks dropped their interest rates on the deposit side. However, housing finance companies do not have the same advantage.