Public sector banks are gearing up to announce another round of lending rate cuts.

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While Corporation Bank has followed Punjab National Bank (PNB) by announcing further cut in lending as well as deposit rates, other major banks including State Bank of India (SBI), Canara Bank, Bank of Baroda and UCO Bank have hinted that they are considering jumping on the bandwagon.

Following the meeting of finance ministers Pranab Mukherjee with heads of public sector banks on Monday, Corporation Bank has announced a reduction of home loan rates between 50 basis points to 100 basis points on different maturities and personal loans by 100 basis points. The new floating rate for housing loan up to Rs 30,00,000 would be 9.75 for five years, while for 5-15 years, the rate of interest will be 10 per cent and for 15-25 years 10.5 per cent. The fixed rate is 12 per cent on all maturities.

Corporation Bank has also decided to reduce the deposits rate by 50-75 basis points, with peak deposit rates now standing at 8 per cent, compared with 8.5 per cent earlier. The new rates would be effecting from February 3.

“The cost of funds has decreased marginally. Hence, we have decided to reduce lending rates. Since, we also want to improve our net interest margin, we have decided to reduce deposit rates also," J M Garg, chairman and managing director, Corporation Bank, told reporters after the meeting with the finance minister.

PNB has already reduced its prime lending rate on Friday by 50 basis points to 11.50 per cent. It has also reduced housing, car and education loan rates by 50 basis points. The new rates have become effective from February 1.

PNB's chairman and managing director K C Chakrabarti said there is a case for further reduction of interest rates in the event of inflation coming down. According to an agency report, SBI, is also considering reduction in lending rates. "There is thinking (on these lines)," SBI chairman O P Bhatt said when asked if there is a possibility of reducing the benchmark prime lending rate (PLR) by the bank.

Other banks such as Canara Bank, UCO Bank and Bank of Baroda would be taking a decision in couple of weeks during which the lenders would hold the meeting of their asset liability committees (Alcos). "Interest rates are going downward. We will also take a decision in due course of time," A.C. Mahajan, chairman and managing director, Canara Bank, told reporters.

UCO Bank sees a cut in lending rates up to 200 basis points. "We may reduce lending and deposit rates by 200 basis points in two-three tranches by March 31," said S.K. Goel, chairman and managing director, UCO Bank.

Meanwhile, leading private sector bank, ICICI Bank said is yet to make up its mind on the interest rate structure going forward. Private housing finance entity, HDFC, also said that it would like to wait for the market's reaction to the recent move by SBI to cut home loan rates. "We will be having an Alco meeting soon but that is a general meeting and not specifically to discuss rate cuts," an HDFC official told Financial Chronicle. The HDFC spokesperson could not be reached for comments at press time.