HDFC Bank may cut base rate soon

Following the cut in base rate by country's largest lender State Bank of India (SBI), India's second largest private bank HDFC Bank may also cut its base rate soon. 

“The broad principle is when costs goes down, interest rates will also go down. The Asset Liability Committee (ALCO) will decide by how much the base rate will go down,” said the bank's managing director, Aditya Puri, on the sidelines of an event in Mumbai.

The base rate of HDFC Bank currently stands at 9.80% which is a mere 5 basis points above SBI's base rate. Earlier this month SBI had cut their base rate by 25 basis points to 9.75% after the Reserve Bank of India slashed the Cash Reserve Ratio by 25 basis points to 4.5%.

Puri agreed that there will be some pressure on HDFC Bank's net interest margin (NIM) but it will remain in the range of 4-4.2 per cent.

Credit growth in the banking system has been slow during this fiscal for the banking system. But for HDFC Bank the scenario has been different. “We are one of those few banks which has 50% plus exposure in consumer loans. We are also into working capital loans. So the slowdown has come for those who are lending to infrastructure, state electricity boards, finance companies and real estate,” said Puri. According to Puri banking system saw slowdown because large sections which were consuming credit earlier had stopped. “The slowdown would have been more if oil companies were nor borrowing so much,” said Puri.

But Puri expects some improvement in the scenario in the time to come. According to Puri even deposit growth in the banking system has been slow because money supply growth has been slow.

Meanwhile, HDFC Bank today launched Diners Club credit cards in India. The cards are available in three different variants – Black, Premium and Rewardz, the bank said in a statement.  The cardholders would have direct free access to the Diners Club Airport Lounge Program spread over 450 lounges worldwide, the bank informed.

Parag Rao, business head, credit cards, HDFC Bank   said “For us, it’s something that will further enforce HDFC Bank's position as the nation's premier card issuer, one that the country's rich prefer”
The cards are targeted towards high networth individuals (HNIs). The Black variant is the most exclusive card ever launched by  HDFC Bank.

Diane Offereins, president, payment services, Discover Financial Services said, “we recognize the importance of India as a key emerging market and are eager to expand the Diners Club brand in this region”

Diners Club earlier had a partnership with Citibank however it was discontinued in 2008.