Starting a fresh round of rate cuts after repeated calls from RBI, private lender HDFC Bank and state-run Canara Bank today lowered their lending rates by up to 0.35 per cent, a move that will make home and other loans cheaper for consumers.
Other banks may also follow suit due to competitive pressure.
HDFC Bank today lowered base rate by 0.35 per cent to 9.35 per cent — the lowest in the industry, while Canara Bank cut its minimum lending rate by 0.10 per cent to 9.90 percent.
At the same time, country’s third largest private lender Axis Bank cut its deposit rates by up to 0.50 per cent across maturities. A cut in deposit rate is generally considered a precursor for reduction in lending rates.
In its monetary policy review on August 4, RBI Governor Raghuram Rajan had rued that banks had lowered their rates by only 30 basis points despite the central bank having cut its benchmark rate by as much as 75 basis points since January. 100 basis points are equivalent to one percentage point.
Rajan had also linked better monetary policy transmission or banks cutting their lending rates to any future rate reduction by the central bank.
“HDFC Bank has decided to lower its base rate, or the minimum rate of lending, to the lowest level in the industry, to 9.35 per cent from the existing 9.70 per cent. The new rates will be effective tomorrow,” a source told PTI.
The base rate of country’s three largest lenders — SBI, ICICI Bank and HDFC Bank — stands at 9.7 per cent.
Canara Bank in a filing to BSE said, “The board has approved reduction in the base rate by 10 basis points from 10 per cent to 9.90 per cent for loans or advances effective from September 3, 2015”.
Besides, Axis Bank cut its deposit rates by up to 0.50 per cent across maturities.
“We have cut our deposit rates by 0.20-0.50 per cent across tenors. The revision will be effective tomorrow,” a senior official from the bank told PTI.