HDFC Bank cuts lending rates by up to 0.10%

New Delhi: HDFC Bank, the country’s largest private sector lender by market value, has cut its marginal-cost based lending rate (MCLR) for various tenors by up to 10 basis points (bps).

According to HDFC Bank’s website, its three-year MCLR and base rate has been reduced by 10 basis points to 8.50% and 9.20% from 8.60% and 9.30% respectively.

It’s one-year MCLR now stands at 8.30% as compared to 8.35% in October 2019. Similarly, its overnight, one month, three months, six months, two year MCLR has been cut by 5 basis points.

Earlier, HDFC had reduced its MCLR by 10 basis points across all tenors in August this year.

Worth mentioning here is that the Reserve Bank of India has slashed repo rate by 135 basis points in five back-to-back cuts since the beginning of this year to revive economic growth in an economy that is witnessing slowest growth in six years.

However, banks are yet to pass on the full benefit to borrowers because of high cost of funds. In order to hasten the repo rate transmission, RBI had asked all banks to link all their floating rate loans, SME loans to an external benchmark. While most of the public sector banks like State Bank of India, Punjab National Bank have already linked their floating rate loans to repo rate, private sector lenders like HDFC Bank are yet to launch external benchmark-linked loans.

Banks have expressed their inability to link floating rate loans to external benchmark as their cost of fund is linked to deposit rates, which are sticky in nature.