HDFC Bank sets base rate at 7.25%

Private sector lender HDFC Bank today fixed the minimum lending rate at 7.25 per cent, 25 basis points lower than market leader State Bank of India's (SBI) rate.

Others who have fixed the rate below that of SBI so far are Dhanalakshmi Bank and DBS Bank. Both have fixed the rate at 7 per cent. SBI yesterday pegged the minimum lending rate or base rate at 7.5 per cent effective from July 1.

"We have fixed our base rate at 7.25 per cent. I do not expect any direct impact on our consumer loans as most of our consumer loans are fixed rate loans...The impact on corporate loans is also not material," HDFC Bank's Executive Director Paresh Sukthankar told reporters on the sidelines of the bank's AGM here.

Even as the base rate regime kicks in, the effective rate on loans is likely to remain almost the same and it is unlikely to affect the bank's margins, he said.

"There will be no impact on our margins," he said, adding, the base rate is the minimum rate and it is a reflection of the market rate.

The bank has taken into account the cost of two-three short-term maturity deposits as the main parameter, along with other elements, while fixing the rate, he said.

Sukthankar, however, said that there may be some rise in the rates of short-term corporate loans who were availing loans at much lower rates, with the base rate coming in.

The Reserve Bank has directed banks to come out with base rate or the minimum lending rate from July 1. Through the base rate regime, the RBI seeks to make banks stick to a declared lending rate, below which no bank can lend, with a view to bring about more transparency in the lending regime.