Kotak Mahindra Bank cuts base rate by 0.25 percent to 9.50%

Mumbai: Two days after the Reserve Bank's surprise 0.50 percent rate cut, fourth largest private lender Kotak Mahindra Bank slashed its base rate by 0.25 percent to 9.50 per cent, on Thursday effective October 5.

The base rate cut has been possible on revisions in the deposit offerings in recent past and the bank will also be cutting its deposit rates marginally, said Kotak Mahindra Bank president and group chief financial officer Jaimin Bhat.

There will be an impact on the margins in the short-run, he said, adding that the net interest margin will not slip below the 4 per cent mark. The bank had posted a Net Interest Margin (NIM) of 4.2 per cent for the June quarter.

He explained that nearly 70 per cent of the lending at the bank is linked to the base rate which gets repriced immediately but the lag in repricing of the deposits hurts margins in the short term.

Bhat added that the bank already follows the marginal cost of funds-based formula for calculating base rates.