New Delhi: The Reserve Bank of India's (RBIs) credit policy, which is expected to be announced on Tuesday according to industry experts may affect a reduction in interest rates on various loans, home loans in particular.

At least a 25 basis point reduction in rates are very much expected by RBI given the immense pressure by banking industry and the recent 75 basis point rate cut by the US Fed. The benefit of rate cut is very much expected by the banks to the customers since they are already facing a shortage in credit-offtake and are under pressure to meet the lending targets.

The recent increase in floating interest rates on home loans had led to a considerable increase in EMI values and the high property prices has also led to a decline in home loan offtake. The impact on lending targets was absorbed so some extent by the festive discounts and waiver of processing fees offered by leading banks. But, the result was not as expected and banks were forced to extend the discounts beyond their deadline of 31st December and the festive offer is still on till 31st January.

The credit growth, which was pegged at 31.9 percent last year was only able to registered a 22.2 percent growth this fiscal. The Finance Minister P Chidambaram had also asked the banks to cut the lending rates by another 50 basis points so that the situation improves, but banks expressed their inability unless there were some positive signals from the RBI. Given the present scenario, and surplus availability of funds with the banks, experts feel that it is imminent that RBI will cut rates sooner or later and so they expect that banks will cut interest rates even if there is no immediate but a hint of such a step by RBI in future.