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Federal Bank cuts base rate by 10 bps

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has become the country’s first private sector lender to cut its base rate, or the minimum lending rate, after the Reserve Bank of India (RBI) changed its stance on monetary tightening last year. The Kerala-based bank cut its base rate by 10 basis points to 10.65 per cent. The new rate is effective from yesterday.

Earlier, two state-run lenders, and Bank of Maharashtra, had reduced their base rates by 10 basis points each. For Union Bank of India, the rate has now been revised to 10.65 per cent. For Bank of Maharashtra, the minimum lending rate has been changed to 10.6 per cent.

Federal Bank on Tuesday said it planned to open 100 branches this Saturday. This would expand its network to 938. The move is aimed at improving the mobilisation of low-cost current account and savings account deposits.

Managing director and chief executive officer said, “This expansion of branches will propel the business growth of the bank in the coming years.” Last year, the bank hired 2,000 employees. It plans to add another 1,000 staff by March 2013. Currently, the bank has 9,000 employees.

Senior bank officials said its loans to troubled Kingfisher Airlines turned non-performing last month. The bank’s loan exposure to Kingfisher Airlines stands at about Rs 90 crore. It also has Rs 300-crore credit exposure in Air India, which is currently being restructured.

The Reserve Bank of India had kept key policy rates unchanged in December, owing to concern over slow economic growth. In January, the central bank did not raise rates, and even hinted at reversing the rate rise cycle, as inflation appeared to have peaked.

The central bank is set to release the mid-quarter policy review on March 15.

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