Canara Bank on Thursday indicated a 0.25 per cent cut in home loans taken from the bank for a period upto 10 years, showing that the home loan rates might not have bottomed out yet.

"I personally feel there is a scope for further softening of interest on home loans," Canara Bank chairman R N Shastri told PTI in New Delhi, inaugurating its first overseas banking unit in the northern region.

Asked to what extent there could be a reduction in home loan rates, he said there was a scope for upto 0.25 per cent reduction since its cost of funds had come down marginally and there was also reduction in transaction costs due to computerisation.

Canara Bank's cost of funds had come down to 5.4 per cent from 6.3 per cent previously.

He said retail business had the potential to grow in the coming years.

The bank had a home loan portfolio of about Rs 2,600 crore (Rs 26 billion) and its disbursements were to the tune of 70 per cent in 2003-04.

Asked if there would be any reduction in savings bank deposit rates, he said the banks had already asked for 0.5 per cent cut.

"Savings bank accounts are not interest rate-sensitive and are used for liquidity purposes," Shastri said.