After repeated chiding by RBI chief Raghuram Rajan on banks not passing rate cut benefits to consumers, HDFC Bank today lowered its base lending rate by 0.35 per cent to 9.35 per cent -- the lowest in the industry.
The move may trigger a fresh round of rate cuts by other banks as well.
"HDFC Bank has decided to lower its base rate, or the minimum rate of lending, to the lowest level in the industry, to 9.35 per cent from the existing 9.70 per cent.
The new rates will be effective tomorrow," a source told PTI.
Currently, the base rate stands same at 9.7 per cent for the country's three largest lenders -- State Bank of India, ICICI Bank and HDFC Bank.
In its last monetary policy review on August 4, the RBI Governor had rued that banks have lowered their rates by only 30 basis points despite the central bank having cut its benchmark rate by as much as 75 basis points since January.
Rajan has also linked better monetary policy transmission or banks cutting their lending rates to any future rate reduction by the central bank.
"The central bank will look for more room to ease policy rate pending fuller transmission of rate cuts by banks as they have cut only 0.30 per cent at the median level as against the RBI's cut of 0.75 per cent," Rajan had said.
The RBI has lowered its policy rate by 25 basis points each on three occasions so far this year, the first being on January 15, followed by another cut in March.
Banks first lowered their rates in April and then in June after Rajan chided them for holding onto higher rates.