HDFC Bank cuts interest rate by 0.25%

The country's second largest private sector lender HDFC Bank on Monday slashed benchmark lending rate by 25 basis points to 15.75 per cent.

Benchmark Prime Lending Rate has been reduced to 15.75 per cent per annum with effect from July 20, HDFC Bank said on its web site.

The cut in lending rate follows the reduction in the fixed deposits rate effective from May 18.

In the past six months, the PLR has been reduced by 75 basis points. The bank last reduced its PLR in December 2008, when the rate was brought down by 50 basis points to 16 per cent.

Private sector lenders mostly give loans below PLR. However, some of the corporate loans are linked to the benchmark rate.

Thus, to study the relevance of PLR in the changed scenario, the Reserve Bank last month constituted six-member working group to review the Benchmark Prime Lending Rate (BPLR) system and suggest a mechanism for pricing of floating rate loans, a move that will improve transparency in fixation of interest rates on housing loans by banks.

The working group, chaired by RBI executive director Deepak Mohanty, comprises JP Morgan India chief economist Jahangir Aziz, and an Indian Institute of Management (IIM) Ahmedabad professor as its members.