Even as its larger rival HDFC Bank cut base rate by a sharp 35 basis points to 9.35 per cent late last month, the third-largest private sector lender Axis Bank today ruled out any immediate reduction in its loan pricing.
Stating that their cost of funds does not allow them to trim lending rates now, Axis Bank Managing Director and Chief Executive Shikha Sharma said, "I think over the next couple of months there will be (a base rate revsion)... We review our base rate and cost of funds at every Alco (asset liability committee) meeting."
At present, Axis Bank's base rate stands at 9.85 per cent as compared to 9.35 of HDFC Bank.
One basis point is one-hundredth of a percentage.
Explaining the rationale for base rate cut delays, Sharma said it takes time for the entire deposit base to get repriced and 75 per cent of the bank's loan book are linked to the base rate.
Asked about her views on the new base rate computation proposed by the RBI which is based on marginal cost of funds, she said the bank has been following a very disciplined approach on the issue.
The private lender computes base rate based on the cost of its funds and will change the same as and when the new regulation sets in (from next April), Sharma said.
On August 31, HDFC Bank had surprised the markets with a steep 35 basis points reduction in its base rate to 9.35 per cent, citing lower cost of funds, making its loan pricing the lowest in the industry.
Though the HDFC move signalled a lower interest rate regime in the banking system, no other lender has followed suit.
It can be recalled that in spite of Reserve Bank Governor Raghuram Rajan coming down heavily on banks for not passing on the entire benefit of its 75 basis points rate cuts since January 15, the lenders have reduced their base rates only by about 30 basis points in two to three installments, citing higher cost of funds for them.
At the last policy announcement on August 4, Rajan had even linked next easing to banks cutting their rates more aggressively.
Larger banks like SBI and ICICI offer loans at 9.70 per cent now, while the top mortgage lender HDFC offers at 9.85 per cent.
On August 31, Axis Bank told PTI it had cut deposit rates by 0.20-0.50 per cent across tenors.
