Kotak Mahindra Bank lowers base rate to 9.75%

The fourth largest private sector lender Kotak Mahindra Bank (KMB) today cut its base rate by 0.10 per cent to 9.75, joining its larger rivals which have announced such downward revisions in the recent past.

"Kotak Bank has reduced its base rate from current level of 9.85 per cent per annum to 9.75 per cent per annum with effect from July 2," the city-based lender said in a statement.

The bank's executive vice-chairman and managing director Uday Kotak had last week hinted of a cut in the base rate. The new rate being offered by the bank is 5 bps higher than its larger rivals.

Larger players like ICICI Bank, HDFC Bank and Axis Bank have each announced two rate cuts this fiscal. The most competitive offering in the system is at 9.70 per cent.

SBI was the first off the blocks to reduce its base rate earlier this month after Rajan in the June 2 monetary policy statement urged banks to pass through the sequence of rate cuts into lending rates.

SBI had reduced its base rate by 15 basis points to 9.70 per cent. The second largest private sector lender HDFC Bank followed suit last week by slashing its base rate by 0.15 per cent to 9.70 per cent and ICICI Bank also tweaked its offering to match the leader.

Rajan, who has been pressing hard for the banks to transmit the 0.75 per cent cut in repo rate to the borrowers, has also warned bankers of dis-intermediation by other money market instruments where the rates are lower.

Banks are flush with liquidity and have not seen substantial rise in credit demand, which is forcing them to act on rates.