Axis bank reduces base rate by ten basis points

The lender has revised its base rate to 10.15% from 10.25%

Axis Bank, India’s third-largest private sector lender, has reduced its base rate by 10 basis points (bps) to 10.15 per cent on the back of a decline in cost of funds.

The move comes despite the Reserve Bank of India (RBI) deciding to hold interest rates in the past four policy reviews, the last one being in September.

Sidharth Rath, president (treasury, business banking and capital markets) at Axis Bank, said: “The bank has reduced the base rate by 10 bps as the cost of fund has eased due to softening of interest rates based on improving liquidity and other macroeconomic developments.”

After a spell of tight liquidity in July and August, liquidity has eased considerably as the government started spending, while loan demand has remained muted.

Several other banks have also been reducing their corporate bulk deposit rates because of the comfortable liquidity situation in the market.

Base rate is the benchmark rate that all loan rates are linked to. A cut of 10 bps in base rate will lead to the reduction in all other lending rates - such as that of home loan and auto loan - by a similar quantum.

According to RBI data, credit grew by a mere 11 per cent for the year till October 3, which was above 16 per cent in the previous year.

Deposit growth in the same period outpaced credit growth and expanded 13 per cent to Rs 82,89,310 crore as of October 3, compared to a year ago.

After falling to single-digit growth in September, there are early signs of credit demand picking up in the festival season.

The base rate of large lenders such as State Bank of India, ICICI Bank and HDFC Bank is 10 per cent, while that of most public-sector banks is 10.25 per cent.