Home loan rates over the industry are likely to decline following the repo cut on October 20th. Almost all commercial banks are planning to cut interest rates on home loan by 0.50%.

Country's largest home loan lender, State Bank of India (SBI) is on course to slash its housing loan interest rates by about 50 basis points before Diwali. On the other hand Punjab National Bank (PNB) and Union Bank of India (UBI) have already declared 50 basis points cut in their home loan rates.

Private sector lenders like HDFC Bank and ICICI Bank are planning to adopt a wait and watch policy before taking any decision regarding the rate cut.

SBI is finalizing plans to slash rates after the credit review of RBI on October 24th. Even though loans will become cheaper, the bank plans to tighten its lending criteria for individual borrowers.

An SBI official said, "Our bank is contemplating a rate cut following the recent measures taken by the Reserve Bank. Though the decision to reduce rates may come at any point in time, it's expected that the bank would take a decision after seeing RBI's half-yearly monitory policy on October 24."

Earlier UBI had cut interest rates by 50 basis points for home loans up to Rs 30 lakh. Loans above Rs 30 lakh will witness a cut of only 25 basis points and loans amounting to Rs 75 lakh and above may see an even lower rate cut.

In fact many banks are planning to hold on the interest rates for loans that would exceed Rs 75 lakh. Banks including SBI have introduced a new slab for home loans over Rs 75 lakh. Initially they had only two slabs for the home loans- below Rs 30 lakh and above Rs 30 lakh. They are also resorting to follow stringent norms for lending so as to decide the borrower's creditworthiness at this time of slowdown.

A finance ministry official said, "The government and the central bank have taken a series of measures to infuse liquidity into the system and there is no reason that the banks should be wary of providing credit to genuine borrowers even after that."

Also, these rate cuts may not be applicable to all types of loans and commercial borrowers like real estate companies.