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HDFC Bank throws gauntlet, cuts base rate by 0.35%

HDFC Bank, the country’s second-largest private-sector lender, slashed its base rate — the minimum rate at which it lends — by 0.35 percent to 9.35 percent, effective tomorrow.

TheNewsInternational Team

HDFC Bank , the country’s second-largest private-sector lender, slashed its base rate — the minimum rate at which it lends — by 0.35 percent to 9.35 percent, effective tomorrow.

The move comes after the Reserve Bank of India cut its benchmark repo rate thrice this year (by a total 0.75 percent), and urged banks to follow through with cuts on their lending rates.

“The base rate is linked to cost of funds [which has come down recently]. Our alco (asset-liability management committee) met today and decided to execute the rate cut,” Ashish Parthasarathy, Head of Treasury at HDFC Bank said.

The move by the retail customer-focused HDFC Bank’s will put pressure on other large lenders such as ICICI, SBI and Axis to follow through with rate cuts of their own. 

At 9.35 percent, HDFC Bank’s base rate is the lowest among banks. Peers SBI and ICICI Bank are at 9.7 percent but may move soon.

So far, banks have been reluctant to cut base rates in a major way, saying that banks’ cost of funds had not come down by the same quantum as the RBI’s rate cuts this year.

HDFC Bank has been a bit of an exception, cutting rates thrice by a total of 0.65 percent till now.

Parthasarathy told CNBC-TV18 that further rate cuts by banks, including HDFC Bank, can be expected by did not provide any timeline.

“The interest rate trajectory is clearly on a downward trend,” he said.

The RBI is widely expected to cut interest rates again at its bi-monthly monetary in September this year, in light of consumer inflation falling to an all-time low, to below 4 percent — well below its 6 percent target for the year.

To be updated.

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