HDFC cuts base rate amid tight liquidity

HDFC cuts base rate amid tight liquidityHDFC Bank, India's second-largest private sector lender, has reportedly slashed its minimum lending rate or base rate by 10 basis points, from 9.7 per cent to 9.6 per cent.

Effective from Saturday, March 30, the base rate cut by the private lender followed a repo rate cut of 25 basis points by the Reserve Bank of India (RBI) on March 19.

Following the cut, HDFC Bank's base rate is the lowest among large lenders. Public-sector lender State Bank of India (SBI) has a base rate of 9.7 per cent, while private-sector lender ICICI Bank has a base rate of
9.75 per cent. Axis Bank's current base rate is at 10 per cent.

Some lender, the Punjab National Bank (PNB) and Bank of Baroda (BoB) have slashed their minimum lending rate by 50 basis points since the start of current fiscal year, but their minimum lending rates are still relatively high at 10.25 per cent.

Lenders are reluctant to make big cuts in their minimum lending rates because of liquidity shortage.

Due to tight liquidity, the benchmark government bond yield is currently touching 8 per cent. There is some hope that liquidity pressure will ease in the next financial year, but the relief may be very small.