Home loan interest rates are all set to be cheaper as all public sector banks are planning to cut rates on small-ticket home loans by up to 300 basis points. RBI may also help the banks by relaxing the risk weight age norms. It is expected to revise the capital adequacy ratio (CAR) for every loan, which is currently 9 per cent.

Revised interest rate for home loans would increase the fund flow in the housing sector. Indian Bank’s Association is meeting tomorrow to decide different ceiling interest rate on housing loans of up to Rs 5 lakh and more than Rs 5 Lakh. However, there is no possibility of revision of rates of the benchmark prime lending rates (BPLR). A banker said that BPLR cut marginally benefits small scale industry and retailers whose support is very much crucial for the forthcoming general elections.

UCO Bank chairman and managing director, SK Goyal said, "We have decided to bring down interest rates for loans up to Rs 20 lakh by 200 basis points while loans up to Rs 5 lakh would be cheaper by 300 basis points." Oriental Bank of Commerce (OBC) and Bank of India also hinted to revise loan rates within a couple of days.

Government has also made special provisions in the recently launched economic stimulus package for encouraging small home loans. Now, it's the turn of the banks to give positive response to help the crisis ridden industry.