HDFC Bank to review base rate next week

Last Updated: Wed, Jul 06, 2011 19:40 hrs

Private sector lender HDFC Bank is set to take a call on raising its lending rates next week. “We will review our base rate at the meeting of the asset liability committee, scheduled next week,” said Managing Director Aditya Puri.

HDFC Bank is one of the few lenders which refrained from increasing base rate after the Reserve Bank of India (RBI) raised key policy rates by 25 basis points in its mid-quarter policy review on June 16. Subsequently, like ICICI Bank, Canara Bank, Corporation Bank, Indian Overseas Bank and Dena Bank raised base rates by 25 basis points.

A 25-basis-point increase in policy rates impacts banks’ borrowing by 5-10 basis points, as the increased rates affect the incremental borrowing only, he said. “So, every time when the regulator hikes the policy rates, it does not mean that a bank has to pass it on to its customers immediately,” Puri said while addressing the media on the sidelines of the bank’s annual general meeting.

Puri reiterated that so far there were no pressure in the margins and credit off-take, and the bank was likely to maintain a net interest margin in the range of 3.9-4.2 per cent in the current financial year.

If the economy grows by eight per cent, taking the multiplier effect of 2.5 times into account, the credit growth in the industry will be around 20 per cent. Then HDFC Bank would be maintaining 22 per cent credit growth in the current financial year, he said.

However, he added that though the demand for the working capital loans had increased, the investment in the infrastructure space is slowing down.

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