HDFC Bank raised its base rate by 20 basis points to 9.8% with effect from August 3, it said in a notification on its website. The private sector lender has become the second bank to hike its base rate after the Reserve Bank of India (RBI) announced tighter liquidity measures on July 15.
On July 31, Yes Bank had also raised its base rate by 25 bps to 10.75%, while raising its deposit rates by 25-50 bps.
HDFC Bank had also raised its deposit rates in July, for maturities less than one year. In case of deposits ranging between 15 days to six months, the rates were hiked by 100 bps, while for deposits between six months and less than one year, the rates had gone up by 75 bps. Private sector peer Axis Bank too had increased its base rates between 50-400 bps across maturities in July-end.
In the last fiscal, HDFC Bank had reduced its minimum lending rate by 40 bps to bring it down to 9.6% as on March 30, at which point it was the lowest base rate in the entire banking industry.
India?s largest lender, State Bank of India?s base rate currently stands at 9.7%. While SBI is yet to raise its base rate, bank chief Pratip Chaudhuri last week had hinted at the possibility saying the bank would take a call in 2-3 weeks if the RBI does not roll back its liquidity tightening measures.
In July, public sector lenders Oriental Bank of Commerce (OBC) and Punjab & Sind Bank (PSB) had both announced lending rate cuts between 25-26 bps, however they had to rollback their decisions due to the unexpected jump in wholesale funding costs in the second half of july.
In case of non-banking finance companies (NBFCs), the increased cost of funds has started to reflect on the lending rates. Commercial vehicle financier Shriram Transport raised its lending rates on all fresh loans by 25-50 bps across categories starting August 1. Rates on loans sanctioned earlier will not be hiked, confirmed Umesh Revankar, managing director, Shriram Transport Finance.
Housing and Development Finance Corporation (HDFC) is yet to take a call on whether they need to increase the lending rates, said Keki Mistry, vice-chairman and chief executive officer.
To boost the falling rupee by curbing easy liquidity, the central bank had limited the short-term borrowing of banks to 0.5% of the net demand and time liabilities (NDTL) of each individual bank. It also raised the interest rate on marginal standing facility to 10.25%.
RBI also stated that banks will have to maintain 99% cash reserve ratio (CRR) on a daily basis. Banks are required to maintain 4% of their NDTL with the central bank in the form of CRR.
During its monetary policy announcement on July 30, RBI had stated that it will roll back its liquidity control measures in a calibrated manner only after there is some form of staibility in the currency, which has been on the downhill since a few months.