Letters: Booster dose

With reference to the report, "HDFC Bank slashes base rate to 9.35%" (September 1), HDFC Bank is one of the consistent performers. India's second-largest private lender has created a sensation in the market by cutting its base rate by 35 basis points to 9.35 per cent - the lowest offer in the sector.

The move comes at a time when the festival season is days away. Even after the Reserve Bank of India made successive cuts in the key policy rate, banks have been reluctant to pass on the rate cuts to borrowers due to rising bad loans and consequential pressure on margins. But HDFC's sharp rate cut is likely to prompt them to revisit this aspect, as much as their operational constraints would allow. This is where a low-cost operating model, resource generating capacity and risk-taking appetite of banks will come into play and possibly play a critical role in differentiating one bank from the other.

While the stress in the system is evident, that cannot and should not deter banks from garnering more business. In contrast to earlier years, deregulation will increasingly lead to intense competition and could even pinch banks, as it is doing now. This implies that converting a given situation to one's advantage with measured risks while exercising diligence and having the right perception holds the key to remain competitive.

Srinivasan Umashankar Nagpur

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