HDFC Bank hikes base rate by 0.2%

With effect from August 3, India’s leading private sector lender HDFC Bank raised the base lending rate to 9.80 per cent from 9.60 per cent.

The bank has reportedly raised interest rate on the back of RBI measures to contain volatility in rupee exchange rate and increase in short term deposit rates.

Base rate is dependent on cost of deposit which have gone up in the recent past. Last month, HDFC Bank raised fixed deposit rates by 1 per cent for maturities between 15 days to 6 months and one day effective July 27.

For maturity buckets less than 1 year but over 6 months one day, the bank raised the interest rate by 0.75 per cent.

After Yes Bank, HDFC Bank is the second lender to raise lending rate. On March 30, the bank reduced the benchmark lending rate from 9.7 per cent to 9.60 per cent after the Reserve Bank of India (RBI) cut its repo rate by 0.25 per cent on March 19.

Weighed down by a weak rupee, the Reserve Bank chose to keep the repo rate or the rate at which RBI lends to the system, at 7.25 per cent and the cash reserve ratio, the amount of deposits banks park with RBI, unchanged at 4 per cent.

In order to contain rupee depreciation, RBI has taken slew of measures in the past couple of weeks resulting in the tight liquidity situation for the banks.