Mumbai: HDFC Bank is planning to take a call on lowering its lending rates in certain retail products during the upcoming festive season, a senior official said. "From a tactical point of view, we will respond to the market, remain competitive...if the market is moving in a certain direction, we will also remain competitive and I think that is something which we will roll out in the next few weeks," HDFC Bank Executive Director Paresh Sukhtankar said. He, however, did not disclose more details, saying, "I do not have anything to convey in a definitive manner."
ICICI Bank had last week announced lending rate cut up to 1 per cent in home loans. SBI has already announced rate cuts while the ICICI announcement was preceded by similar moves by others like Vijaya Bank. Only SBI has cut its base rate while the other banks have gone for reducing their spreads in loan categories. Sukhtankar said there are two dimensions to a call on cutting rates.
The first is the more structural driver of the movement of cost of funds which is determined by the deposit rates while the second, driven by competition, are tactical moves aimed at gaining market share and remaining competitive during a busy season. During the last quarter, deposit rates have gone down by as much as 0.75 per cent, and there is little scope for them to go down further, he said. On the base rate, Sukhtankar said it is dependent on the movement of the deposit rates and the credit policy initiatives to be announced by the Reserve Bank on October 30.
Like other banks, HDFC Bank will also take a call on the base rate during the quarter, he added. "At sometime during the quarter, we certainly have to recalibrate the base rate," he said. Sukhtankar, however, said HDFC Bank was among the earliest in passing on the benefits of the twin rounds of cash reserve ratio cut by the RBI and cut its base rate in the first quarter.
At 9.8 per cent, he said the bank's base rate is one of the most competitive in the system. He said the bank's credit growth, which came in at almost 23 per cent for the September quarter versus the overall banking system's 16.6 per cent, will continue to outpace the systemic average by a few percentage points. Demand from the retail segment is very good but the wholesale segment, which recorded a growth of under 15 per cent during the September quarter for the bank, is a laggard possibly due to gloomy economic conditions, he said.
Greenfield project loans demand is not coming and the corporate loan demand is driven more by the short-term working capital loan, he said. For the 34th consecutive quarter, HDFC Bank had last week declared over 30 per cent spike in net profit at Rs 1,560 crore driven by health rise in retail advances and the resultant spike in interest come, even as its fee income remained almost flat during the second quarter.