HDFC Bank trims savings account rates to 2.75%

MUMBAI: HDFC Bank, India's largest private sector lender, has cut interest rates on savings accounts by 25 basis points to 2.75% to bring down its cost of funds and protect margins following the 25 basis point cut in the repo rate by RBI. For balances above Rs 50 lakh, the rate now stands at 3.25%, down from 3.5%. The move, while modest, signals a wider recalibration in deposit strategies across the banking sector.

For nearly 14 years, HDFC Bank has not raised its savings rate, even as it periodically trimmed it from a peak of 4% in 2011 to the current level. The latest cut reflects a broader shift in depositor behaviour where customers treat savings accounts more as conduits for transactions than as a savings vehicle. Surplus funds are increasingly parked in fixed deposits, where returns are higher. This behavioural change has reduced the proportion of low-cost current and savings account (CASA) deposits in the banking sectors funding mix.

The last sector-wide cut in savings rates came during the pandemic, when excess liquidity flooded the banking system. In April 2020, State Bank of India dropped its savings rate to 2.75% and trimmed it further to 2.7% in 2022. Banks typically resist adjusting savings rates through the interest-rate cycle, as the cost of these deposits remains below that of term deposits, despite their instant liquidity. According to HDFC Bank's investor presentation, the bank holds over Rs 6 lakh crore in savings balances. A 25 basis point reduction is expected to save the bank Rs 1,500 crore in annual interest payouts. The cut comes as the financial system transitions from a liquidity deficit to surplus. RBI has committed to maintaining liquidity at 1% of net demand and time liabilities, or roughly Rs 2.25 lakh crore.

Earlier, HDFC Bank had reduced fixed deposit rates by 35-40 basis points for select tenures starting April 1 in anticipation of a rate cut. Yes Bank too had lowered its FD rates by 25 basis points. Bandhan Bank cut its savings account rates from 6% to a range of 3-5%, depending on balances. Bajaj Finance also reduced FD rates by 0.25% for longer tenures.

Bank of India has withdrawn its 400-day special deposit scheme, which offered 7.3%. The highest rate for a similar tenure is now 6.75%, a 55 basis point reduction.


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