HDFC Bank has cut interest rates on credit cards by about 5 percentage points per annum. The bank has cut the rates by 30 basis points on a monthly basis for credit card customers, from 2.95 per cent to 2.65 per cent. This translates into a 4.88 percentage point reduction -- from 41.75 per cent to 36.87 per cent -- on an annual basis.

For its own customers -- credit card holders having bank accounts with HDFC Bank -- the bank is offering a cheaper interest rate of 2.45 per cent per month against 2.50 per cent. Thus an existing HDFC Bank customer is required to pay 8.05 percentage points less interest than those who have accounts with other banks but hold HDFC Bank credit cards.

Though interest rates across different financial products have fallen by 4.5 percentage points in the past two years, interest rates on credit cards remained stagnant.

"The fall in interest rates has caused a lower cost of funds. We want to give our customers value for money," said Neeraj Swaroop, country head (marketing, retail lending and branch banking) of HDFC Bank.

"If the card user is a customer of the bank, the reduction in interest rates works out to 8.05 per cent. Around 70 per cent of our credit card holders are our customers. It has helped us in reducing the default rates," he added.

Of the 6.5 million credit card holders in the country, HDFC Bank accounts for 100,000.

The major players are Citibank with a card base of 1.5 million, StanChart 1.7 million, the State Bank of India 1 million, ICICI Bank 750,000 and HSBC 600,000.

None of them are planning any rate cut for now. Most of them charge an interest of 2.95 per cent per month. Some charge marginally lower rates for their preferred customers.

Only ABN Amro Bank is offering a lower interest rate at 2.49 per cent per month to its gold card customers.