HDFC Bank Leads Base Rate Cut, At 9.35% Offers Lowest Now

Signalling a lower interest rate regime, the second-largest private lender HDFC Bank slashed its minimum lending rate by a hefty 35 basis points to 9.35 per cent -- the lowest in the industry now, said the media reports.

One basis point is one-hundredth of a percentage point.

HDFC Bank Leads Base Rate Cut, At 9.35% Offers Lowest Now
HDFC Bank: Quotes, News
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The new lower rates from HDFC Bank will be effective tomorrow, making bank loans cheaper for its borrowers and will help drive demand for auto and home loans. Credit growth for the banking system has been trending down at under 8 per cent, a multi-decade low.

The surprise rate cut is likely to force other major lenders into reducing rates, analysts say.

This is the third rate reduction by the city-based bank since the beginning of this fiscal year.

In spite of Reserve Bank Governor Raghuram Rajan coming down heavily on banks for not passing on the entire benefit of its 75 bps rate cuts since January 15, the lenders have reduced base rates only by about 30 bps, citing higher cost of funds.

At the last policy review on August 4, Rajan had even linked next easing to banks cutting their rates more aggressively.

"Our Alco (asset-liability management committee) met today and has decided to reduce our base rate, or minimum rate of lending, by 0.35 per cent to 9.35 per cent with effect from tomorrow. The base rate is linked to our cost of funds," HDFC Bank Treasury Head Ashish Parthasarathy told PTI.

When asked how much the cost of funds has come down, he refused to elaborate, saying the lowering trend is expected to continue.

He also refused to hazard a guess on if the bank expects an immediate repo rate cut by RBI, saying the decision is based on the assessment of its own cost structure.

State Bank Chairman Arundhati Bhattacharya said the bank has not taken a call on rates. "Not yet, but we will consider what needs to be done," Bhattacharya told PTI.

Read more about: hdfc bank
Story first published: Tuesday, September 1, 2015, 12:40 [IST]
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