New Delhi: Looks like the the earlier cut in interest rates on home loans didn't work out as expected for Bank of Baroda (BoB). Last week saw a huge 50 to 200 basis points reduction in retail loans by the public sector giant SBI. This step has left the competition jittery and in what could be a balancing act, BoB has decided again that it will reduce the interest rates on home loans.

In just a matter of 45 days BoB has further reduced its home loan rates by up to 75 basis points. The effective interest rates on BoB home loans now lie between 10 to 10.5 percent.

It has not ended here, BoB has also reduced its repayment slabs to three from the prevailing five. The new rates will be effective from October 15, 2007. BoB had earlier reduced its interest rates on home loan by 25 basis points in September.

V. Santharaman, ED, Bank of Baroda said, “We have reduced home loan rates again in response to the decisions by competing banks to cut rates.” It is now very clear that SBI has set the pace and the competition must catch up.

Earlier SBI decided to cut its interest rates on home loans and other retail loans by 50 to 200 basis points followed by a 50 basis point reduction in home loan rates by ICICI Bank the largest private sector lender in India. While the interest rate reduction offers of SBI, ICICI, HDFC, IDBI, Canara Bank and a host of other banks are touted as festival offers BoB made its position clear that this is not a festival season discount, but a regular reduction.

BoB has also reduced its fixed rate home loans by 25 to 100 basis points but it is not expecting this step to cause a major stir in the home loan market since the offtake and popularity of fixed rate home loan is considerably less as compared to the floating rate home loans.