HDFC Bank to cut lending rate by March 2015, says MD Aditya Puri

HDFC Bank, having cut its deposit offering by up to 0.50 per cent, will be cutting its lending rate by March, a top official said on Friday.

"Now I've reduced my fixed deposit rates, and you will see by March or so base rate will come down," the bank's Managing Director Aditya Puri told PTI after launching a blood donation drive.

The HDFC MD said base rate or the minimum rate of lending is computed on the cost of deposits and the bank cannot cut its lending rate unless the deposit rate comes down. Once the cost of deposits falls, following the December 1 cut in short-term deposits of up to one year maturities, the bank will pass on the benefit to borrowers, Puri added.

The country's second-largest private sector lender, HDFC Bank's base rate currently stands at 10 per cent and the last movement in it was in November 2013, when the rate was hiked by 0.20 per cent.

The private bank cut the deposit rates by 0.25 to 0.50 per cent in various buckets ranging from 49 days to less than a year deposits, attributing it to low credit pick-up, drop in money market rates and competitor's moves.

On Tuesday, Reserve Bank of India (RBI) Governor Raghuram Rajan had rued the fact that banks are not passing the benefits of the declining rates environment to the borrowers, saying the policy measures were not getting transmitted as desired.

Puri on Friday said that policy transmission has happened as the banks have cut rates in different offerings like car loans where banks have reduced their spreads, but added that it does not reflect in the base rate due to deposit rates.

"Already interest rates have gone down in the market, whether it is car loans or term loans. Monetary transmission with or without reduction in policy rates has already happened," he said.

The HDFC Bank head said the RBI Governor's stance has been dovish, which comforts the banking system and added that Rajan should unleash 0.50 per cent cut in the next monetary policy review.

"His (Rajan's) statement is also dovish, saying that once he can see stability in the benignness of the inflation, you can expect a cut. Let's hope that the cut is a meaningful one at 50 basis points since he didn't do it this time," Puri said.

HDFC Bank on Friday started a day-long blood donation drive at 2,000 locations across the country simultaneously. In 2013, the private lender had collected 67,000 units of blood in a similar drive and is targeting the same to go up to 1 lakh in 2014, Puri said.