Mumbai, June 29: HDFC Bank today decided to cut its benchmark lending rate by 20 basis points, making loans cheaper for borrowers.

Sources close to the bank said its base rate, or the minimum lending rate, would stand revised to 9.8 per cent from 10 per cent.

It is also learnt that the bank’s benchmark prime lending rate (BPLR), the benchmark rate for some of its borrowers, may also be brought down by a similar margin to 18.30 per cent. The new rates will be effective from tomorrow and provide relief to both its new and existing borrowers. However, the BPLR cut could not be officially confirmed from the bank.

The rate cut decision by HDFC Bank is surprising since it comes after a status quo in the RBI’s mid-quarter review of the monetary policy. The central bank had then left its repo rate unchanged at 8 per cent as inflation continued to be a big worry. The RBI also brushed aside suggestions to trim the cash reserve ratio (CRR), which is pegged at 4.75 per cent.

The repo is the rate at which the RBI provides funds to banks; CRR is that portion of deposits which must be maintained with the apex bank. The RBI’s decision to hold off on a rate cut prompted many banks to leave their lending and deposit rates unchanged.

Banking circles point out that HDFC Bank had not brought down its benchmark rate after the central bank had cut the repo rate by more than expected 50 basis points in the annual monetary policy on April 17.

“Therefore, it could be a combination of low cost funds and competitive pressures that must have led HDFC Bank to bring down the lending rates,’’ sources said. They, however, added that the other banks were unlikely to follow HDFC Bank’s cue.

The State Bank of India had also failed to lower its base rate after the April monetary policy. However, the PSU bank had recently cut lending rates by 50-350 basis points to corporate houses and the agriculture sector by realigning the spread over its base rate, though this rate relief was not extended to retail borrowers.