Bank of Baroda cuts home loan rates again

Feeling the heat of competition, Bank of Baroda (BOB) has cut the interest rates on new home loans for the second time in just 45 days. It has slashed the floating rates by upto 75 basis points to 10-10.5 per cent.

The public sector bank has also reduced the number of repayment slabs for floating loans from five to three.

"We have reduced home loan rates again in response to the decisions by competing banks to cut rates", V Santhanaraman, Executive Director, Bank of Baroda said. The new rates are effective from October 15, 2007. The bank had reduced the rates by 25 basis points in September.

The State Bank of India reduced interest rates on new homes, cars, truck and farm equipment loans on October 8 by 50 to 200 basis points. This special offer would continue till December 31. ICICI Bank, the largest private sector lender, lowered the interest rates on floating home loans by 50 basis points to 11 per cent.

BOB's floating rate loans upto Rs 20 lakh would attract interest rates between 10 per cent and 10.50 per cent, for a period ranging from 5 to 25 years. Under the new three-slab structure, loans with repayment periods upto five years would attract 10 per cent rate of interest.

The interest rates on loans in 5-15 year category would be 10.25 per cent and those in the 15-25 year slab would carry 10.50 per cent rate of interest. The rates would vary from 10.25 to 10.75 per cent for loans exceeding Rs 20 lakh.

The public sector bank has also effected a cut of 25-100 basis points for fixed rate loans. However, such loans have a poor offtake record and enjoy only a small share in its outstanding home loans of Rs 6,500 crore.

"This is not a festival season discount, but a regular reduction," stressed Nandan Srivastava, general manager, retail banking.

The bank's margins would not be affected by the rate cut as it has already reduced the interest rates on centenary deposit scheme from 9.5 per cent to 9 per cent. The bank expects to maintain net interest margins around three per cent in 2007-08, he said.