HDFC Bank sees interest rates softening by 50-75 bps

Interest rates are likely to soften by 50-75 basis points in the year ahead, according to Aditya Puri, Managing Director, HDFC Bank.

When asked about what the Reserve Bank of India’s interest rate policy stance should be after the Union Budget, Puri said, “Interest rate is not the panacea or the cause (for economic growth).

“Yes, it (lower interest rates) can help if inflation comes under control, which to an extent has and we saw some transmission with the 25 basis points cut (in RBI’s key policy rates).”

If the fiscal and current account deficit comes down during the course of the year then there could probably be another 50-75 basis points cut in the policy rates, he said on the sidelines of HDFC Bank’s credit card launch.

In a lighter vein, Puri said “Only the RBI Governor or God would know (when the rate cuts would happen).”

Deposit growth

On the slowdown in deposit growth rate in the banking sector, Puri said deposit growth is linked to inflation.

In the absence of debt market, private equity and venture capitalist culture, the primary burden on financing India’s growth is on banks. So, deposit accretion is crucial.

“To some extent personal savings have gone down and to control inflation, money supply has also been increased only by about 13.5 per cent. Hence, it is unlikely that deposit growth will be very much higher.

“We would like inflation to be under control or little bit more liquidity coming into the system and a level-playing field vis-à-vis mutual funds.”

Beena.parmar@thehindu.co.in

Source: thehindubusinessline