Banks Cut Lending Rates Ahead of Festive Season

Strategic Insights -

HDFC Bank, India's second-largest private bank, and Canara Bank, the fifth-largest public sector bank, have announced reductions in their minimum lending rates in a move that could trigger another round of interest rate reductions by banks. HDFC Bank cut its base rate by 35 basis points to 9.35%, while Canara Bank reduced its base rate by 10 basis points to 9.9%. These reductions come ahead of the festive season, which is expected to boost lending demand.

Key Takeaways:

  • HDFC Bank cut its base rate by 35 basis points to 9.35%, making it the lowest base rate among all lenders.
  • Canara Bank reduced its base rate by 10 basis points to 9.9%.
  • HDFC Bank has now reduced its base rate by a total of 65 basis points in 2015, in response to a 75 basis point cut in policy rates by the Reserve Bank of India.
  • Banks such as State Bank of India, ICICI Bank Ltd, Punjab National Bank (PNB), and Kotak Mahindra Bank Ltd, are likely to follow suit and cut their lending rates ahead of the festive season.
  • HDFC Bank's decision to cut its minimum lending rate was made by its asset liability committee, which meets to determine the bank's cost of funds.
  • Manish Ostwal, an analyst at Nirmal Bang Securities Pvt. Ltd, expects further lending rate cuts ahead of the festive season.

Statistics:

  • HDFC Bank's base rate has been cut by 65 basis points in 2015, in response to a 75 basis point cut in policy rates by the Reserve Bank of India.
  • The festive season is expected to boost lending demand, with people likely to buy vehicles and homes in September.
  • HDFC Bank has reduced its deposit rates by varying amounts, with Axis Bank Ltd also reducing its deposit rates by 20-50 basis points in various tenures.

Sources:

  • Ashish Parthasarthy, treasurer at HDFC Bank
  • A spokesperson for HDFC Bank
  • Manish Ostwal, an analyst at Nirmal Bang Securities Pvt. Ltd
  • Arundhati Bhattacharya, chairperson of State Bank of India
  • Siddharth Rath, head of treasury at Axis Bank Ltd
  • Ram Sangapure, executive director at Punjab National Bank