HDFC Bank hints at base rut cut

HDFC Bank MD & CEO Aditya Puri on Tuesday hinted that the lender might cut its base rate from the current level of 10%. Puri said that with the cost of funds trending downwards, the case for lending rate cuts had become strong.

Speaking at a press conference, Puri stopped short of announcing a rate cut since the bank's Asset Liability Committee (ALCO) is scheduled to meet in the third week of September. The country's largest lender, State bank of India (SBI), had cut its base rates by 25 basis points (bps) to 9.75% last week.

"Apart from the CRR cut, banks have cut their deposit rates, which has brought down costs. The base rate calculation is such that if your cost goes down, you can, at the most, lag in the quarter, but then you will have to reduce your rates. But the final call on rate cuts will be made by the ALCO," said Puri.

Around 30-40% of the bank's portfolio is linked to the base rate.

Puri said that credit growth in the consumer and working capital segments remained strong. However, lending to infrastructure and capital goods segment has lagged. "Around 50% of our lending has been to the consumer segment, which has not seen a significant slowdown. Therefore, our loan growth has not been hit." He said the bank continued to expect margins of 4 to 4.2% for the fiscal.

Puri welcomed the recent reform measures announced by the government and said the resulting momentum could help the country clock a growth of over 6% this fiscal.

Puri was speaking at the sidelines of the bank's announcement of a tie-up with premium US credit card issuer Diners' Club. HDFC has launched three co-branded cards, targeted at frequent travellers and lifestyle spenders. The cards, which carry an annual subscription of up to R20,000, will be sold both to banks' accountholders as well as outsiders.

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