Anticipating a cut in key interest rates by the Reserve Bank of India (RBI) in its monetary policy meeting slated for 30 January, bankers feel that home loan and personal loan interest rate might get softer by 50- 75 basis points. The slack credit growth experienced by most banks during the last year might prompt RBI to provide necessary correction.

Almost all the bankers are unanimous that the interest rates, particularly on home loans have peaked and a decline is inevitable however, they have different opinions on the timing of such event. While Ashvin Parekh of Ernst & Young believes  to drop by 50-75 basis points during the last quarter of this financial year, Rana Kapoor, CEO and MD, Yes Bank says, “while there might not be a reduction in the interest rate in January, there could be a slash in the interest rate during April by half a per cent.”Though, a decline in home loan and personal loans is very much on the cards, bankers feel that auto loans  will remain at present levels, at least in near future. A slack demand in auto loan segment is being cited as the main reason for the rates staying at the same levels.

The demand for car loans has been satisfactory but the high interest rates have made the two-wheeler loan segment, an absolute non-performer. Bankers also feel that the reduced interest rates will also have its impact on the default rates, which climbed steeply after the home loan interest rates skyrocketed.  Home loans, auto loans, two-wheeler loans, personal loans, all the major segments witnessed a high delinquency rate. Some leading are experiencing a default rate as high as 10 percent for personal loans.