Mumbai: ICICI Bank has cut interest rates on floating rate home loans below Rs20 lakh by 50 basis points for new customers.

The effective rate of interest will be 11.50 per cent against 12 per cent on loans of Rs20 lakh and above.

The decision is part of the differential pricing banks are introducing for home loans that qualify for priority sector, after the Reserve Bank of India (RBI) reduced the risk weight for capital allocation on home loans below Rs20 lakh to 50 per cent from 75 per cent in its annual policy statement.

ICICI Bank''s home loan portfolio on 31March, 2007, was around Rs63,500 crore, of which half the loans were below Rs20 lakh.

ICICI Bank has around 800,000 home loan customers and the average loan size is Rs10 lakh. Three years ago, the average ticket size of a home loan at the bank was Rs5 lakh.