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HDFC Bank throws gauntlet, cuts base rate by 0.35%

The country's second-largest private-sector lender, slashed its base rate -- the minimum rate at which it lends -- by 0.35 percent to 9.35 percent, effective tomorrow.

The move comes after the Reserve Bank of India cut its benchmark repo rate thrice this year (by a total 0.75 percent), and urged banks to follow through with cuts on their lending rates.

"The base rate is linked to cost of funds [which has come down recently]. Our alco (asset-liability management committee) met today and decided to execute the rate cut," Ashish Parthasarathy, Head of Treasury at HDFC Bank said.

"The base rate is linked to cost of funds [which has come down recently]. Our alco (asset-liability management committee) met today and decided to execute the rate cut," Ashish Parthasarathy, Head of Treasury at HDFC Bank said.

The move by the retail customer-focused HDFC Bank's will put pressure on other large lenders such as ICICI, SBI and Axis to follow through with rate cuts of their own. At 9.35 percent, HDFC Bank's base rate is the lowest among banks. Peers SBI and ICICI Bank are at 9.7 percent but may move soon. So far, banks have been reluctant to cut base rates in a major way, saying that banks' cost of funds had not come down by the same quantum as the RBI's rate cuts this year. At 9.35 percent, HDFC Bank's base rate is the lowest among banks. Peers SBI and ICICI Bank are at 9.7 percent but may move soon. So far, banks have been reluctant to cut base rates in a major way, saying that banks' cost of funds had not come down by the same quantum as the RBI's rate cuts this year.