MUMBAI: The Reserve Bank of India’s (RBI) moral suasion has worked. State-owned banks have begun bringing down lending rates even without a cut in benchmark rates by RBI. Close on the heels of HDFC, Canara Bank and Allahabad Bank have announced cuts in lending rates.

In a statement issued here on Tuesday, Allahabad Bank said that it has cut lending rates as well as some term deposits rates with effect from February 10, 2008. “The decision to reduce rates has been taken keeping in view the reduction in the cost of incremental funds, falling yield in G-Sec and overall market scenario,” the statement said.

Meanwhile, Canara Bank, the country’s third-largest public sector lender, has reduced interest rates on the existing as well as new housing loans by 25 basis points (bps) with effect from February 7.

Allahabad Bank’s lending rates on retail credit have been reduced by 50-100 bps on housing loan, loans for consumer durables, car loans and education loans. The reduction is applicable for new loans in both the categories — floating and fixed rates. Home loans rates have been cut by 50-75 bps across the board in all tenure buckets. Similarly, interest rates on car loan and consumer durables loan have been cut by 100 bps straightway in all categories. Education loan, too, has been made softer, with a cut in interest rates by 25-100 bps.

Interest rates on deposits have been reduced by 25 bps in all-time buckets having tenure of two years and above up to 10 years. However, for deposits in shorter tenure from 61 days to 180 days, interest rates have been revised upward by 75-100 bps making deposits in these buckets more attractive. Canara Bank’s cut in interest rates is irrespective of loan amount and for all tenure up to 25 years, a Canara Bank press release said here on Tuesday.

All borrowers who have opted for home loans under the floating rate will get the benefit of interest reduction. The revised rates for loans up to Rs 20 lakh will be 10% for five-year tenure, 10.25% for 10-year tenure and 10.5% for tenure above 10-25 years and for loans above Rs 20 lakh, the rates stand at 10.25%, 10.50% and 10.75%, respectively, it said.

Recently, Canara Bank had extended the maximum tenure of loans from 20 to 25 years and had also given the option of repaying the loan in step-up EMIs with a view to help borrowers in smooth servicing of the loan.