The second largest private sector lender, HDFC Bank has decided to cut its benchmark lending rates by 10 basis point (0.1%), making loans cheaper for its borrowers in the coming year.

The base rate or the minimum lending rate of HDFC Bank will become 9.7 per cent from the existing 9.8 per cent, sources said.

And one other hand, the benchmark prime lending rate (BPLR) is expected to be reduced by similar margin to 18.20 per cent. The new rates would be effective from tomorrow, sources added.

HDFC Bank will be the first bank to slash its rates ahead of RBI's third quarter review of monetary policy to be held on January 29th, 2013. The Reserve Bank of India has already considered reducing the key interest rates in the January review.

The Central Bank is closely monitoring the evolving growth-inflation dynamics and would update the projection for 2012-2013in the third quarter review to be held in January.

The Central Bank, looking forward said, "The emerging patterns reinforce the likelihood of steady moderation in inflation going into 2013-14, though inflation may edge higher over the next two months".