Accordingly, new home loans under Rs 75 lakh will be available at 10.25 per cent per annum, down from the earlier 10.50 per cent, while ones above Rs 75 lakh will cost 10.75 per cent as against the earlier 10.90 per cent.
The reduced interest rates will be applicable till January 31.
"The rate cut is driven largely by the scenario in the market place, a reduction in our cost of funds and our expectations from the future," its executive vice president and head of retail assets, Sumit Bali, said announcing the rate cut.
The move follows similar ones announced by the country's largest lender State Bank of India and mortgage major HDFC over the past week, ever since the RBI decided on a status quo in its mid quarter policy review.
According to experts, SBI and HDFC, the top two players in the home loan market, were getting benefited as a result of the change in provisioning norms but decided to wait till the policy announcement before passing on the benefit to their customers.
However, Bali said that the decision by Kotak Mahindra is not prompted by the change in provisioning norms as the bank does not benefit much from the change.
When asked about the impact on margins as a result of this move, he said the rise in volumes will help the bank hold on to the current margins.