HDFC Bank and HSBC have set the ball rolling for their private sector and foreign peers to lower deposit rates.
Effective On Thursday, the country's second-largest private sector lender HDFC Bank lowered deposit rates by 50-225 basis points across various maturities.
A senior bank executive told
Business Standard that, based on the impact on fund mop-up, HDFC Bank will decide over the next few weeks if it will cut lending rates too.
"We have seen a very healthy flow of deposits in the last few months, probably next only to State Bank of India," the executive said.
Similarly, HSBC also lowered interest rates on deposits with a tenure of six months to three years. Now, deposits with the bank will earn between 7 per cent and 8.25 per cent.
Public sector banks have lowered both deposit and lending rates, while almost all private and foreign banks have stayed away from rate cuts despite the Reserve Bank of India reducing key rates.
Public sector banks cut deposit rates from December 1.
HDFC Bank has become the first private sector lender to reduce deposit rates, while other private sector banks said they would also jump on the bandwagon over the next few weeks.
"Interest rates are definitely headed southwards and it is in our interest to cut lending rates over the next few weeks. We are examining the possibility," said a senior executive of a large private sector bank.
"We are closely watching the market movements on liquidity and interest rates