HDFC Bank expects deposit rates to come down if the RBI cuts interest rates in the upcoming policy on Tuesday.
The RBI is due to announce its third Bi-Monthly Monetary Policy 2015-16 on August 4.
“If there is a policy cut, it would imply that banks would be induced to try and cut their deposit rates because that is the indication that the cost of money is going to come down.
“It’s only when the banks reduce their deposit rates that they can re-calibrate their base rate,” said Paresh Sukthankar, Deputy Managing Director, HDFC Bank.
Seeing a 25-50 basis points cut in the policy rate during this fiscal, he added that meaningful movements in base rates would have to follow changes in deposit rates.
There has been a slight pick-up in deposit growth and, more importantly, deposit growth is outpacing loan growth, he said.
“So, when you look at it in relation to each other, there is probably some room for deposit rates to come down and I think that would be the case in some months,” he added.
He was speaking to the media on the sidelines of the launch of HDFC Bank’s CSR initiative, Dhanchayat. The bank plans to reach 5,000 villages over five-six months.