HDFC Bank has cut its minimum lending rate by 20 basis points effective today.
A spokesperson said the base rate will come down to 9.8%, while the benchmark prime lending rate will stand at 18.3%.
The reduction brings down HDFC Bank’s base rate below that of larger peer State Bank of India (SBI), which is still at 10%.
However, further rate cuts would follow a fall in deposit rates, they say, brushing aside suggestions of any attempt to undercut SBI.
“Over the years, HDFC Bank has been targeting prime corporates on the wholesale banking side, while on the retail front, the bank focussed on vehicle loans and other personal loans. It is a decision taken after taking margins into account,†said Vaibhav Agarwal, vice-president - research, Angel Broking.
With this, HDFC Bank has become the first to cut lending rates after RBI’s mid-quarter review of monetary policy earlier this month, which kept all policy rates unchanged.
In the year ended March 31, the bank’s advances grew 22.2% year-on-year mainly due to higher growth in retail loans (33.7%). Its wholesale book continued to fall for the second consecutive quarter and declined 6% sequentially.
“We believe robust earnings growth to continue during FY12-14E (28.8% CAGR) on back of healthy loan growth along with stable NIM and potential credit cost levers. HDFC Bank is well placed in the asset quality cycle with relatively limited exposure to stressed sectors,†Kotak Securities said in a report on Friday.
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