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| HDFC Bank cuts lending rate by 25 bps |
| BS Reporter / Mumbai Jul 21, 2009, 00:22 IST |
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For the first time during the past six months, HDFC Bank, the country’s second largest private sector lender, has cut its prime lending rate (PLR) by 25 basis points (bps) to 15.75 per cent from 16.0 per cent.
The revised PLR is effective from On Monday and will apply to all existing floating rate advances.
The lender had last cut its PLR in two tranches of 25 bps each which had taken effect from December 15, 2008, and January 1, 2009, respectively.
While this is the first time the lender is reducing lending rates in the current financial year, it has pared deposit rates twice so far in 2009-10. It had last cut its deposits rates by 25 bps across select maturities effective from June 19, 2009.
HDFC Bank resisted the pressure to cut interest rates in the wake of the 25 bps cut in policy rates announced by the Reserve Bank of India in its Annual Policy statement on April 20.
India’s largest private sector lender ICICI Bank had declared a 50 bps cut in its benchmark advance rate and floating reference rate within hours of RBI’s announcement.
The country’s largest country lender, State Bank of India (SBI), has cut its PLR by 125 basis points since January 1, 2009, to the current rate of 11.75 per cent.
The extent of lending rate cut by public sector banks, at behest of the government, has been much larger than the downward revision by private and foreign banks.
New Delhi-based Punjab National Bank has been most aggressive in slashing its rates and its PLR currently stands at 11 per cent.
HDFC Bank’s latest move comes amidst talk that there is no further room to cut interest rates. In fact, public sector chiefs have said that interest rates might start inching up in the second half of the current financial year as credit demand revives.
Banks are worried that the government’s Rs 4,21,000-crore borrowing programme might crowd out private sector investment, while putting pressure on market interest rates.
SBI said it saw interest rates rising by up to 100 bps in six months if credit conditions tighten while another public sector lender, UCO Bank, expected a rise of as much as 150 basis points in its PLR.
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