HDFC Bank cuts base rate to 9.3%, levels up with SBI
HDFC Bank, the country’s second-largest private sector lender, has reduced its base rate by 5 basis points to 9.3 per cent with effect from December 28.
Base rate is the benchmark lending rate to which all loan rates are linked.
With this cut, the private sector lender matches State Bank of India’s (SBI) base rate. In October, SBI had reduced its base rate by 40 basis points to 9.3 per cent, in response to the Reserve Bank of India’s policy rate cut of 50 basis points.
“Every quarter, banks have to review their base rate. There is a formula and it throws out a number. So we also have a formula. We reviewed it in the third week of December and the formula showed base rate should be at 9.3 per cent,” Ashish Parthasarathy, treasurer, HDFC Bank told The Hindu . In early September, HDFC Bank took its competitors by surprise by reducing its base rate by a 35 bps to 9.35 per cent.
Cost of funds is one of the main components that decide banks’ base rate. “It would have come down over a period of time,” Mr Parthasarathy said, adding that the bank has not reduced deposit rates.
Going ahead the bank does not expect deposit rates to be re-priced. “Deposit rates have been reasonably stable. No banks have announced any major cut in deposit rate in the last one month. Given the current situation it is unlikely that deposit rate will come down unless there is some change in policy rate or the liquidity situation improves significantly,” Mr Parthasarathy said. Despite the cut, the bank is expected to hold on to its margins. The lender reported 4.2 per cent net interest margins for the second quarter ended Oct 31.
“If you see the last few quarters the margins are in a stable range,” he said.
Read full article: The Hindu
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