HDFC to reduce rates once cost of funds comes down: Parekh

HDFC to reduce rates once cost of funds comes down: Parekh

New Delhi: Private housing finance lender HDFC has ruled out cut in interest rates unless cost of funds declines, even as most public sector banks have already reduced benchmark lending rates by 0.75%.

“Cost of funds is still high, so once it comes down, we will reduce interest rates," HDFC Chairman Deepak Parekh said.

However, deposit rates are set to come down as most of the public sector banks are planning to cut the peak rate by 100 basis points in December. Peak deposit rates of most of the banks would come down to 9.5%.

Taking the lead, the country’s second largest public sector lender Punjab National Bank yesterday announced cutting fixed deposit rates by 25-100 basis points, besides slashing lending rates by 100 basis points to 12.5%, a move that will make auto, home and other commercial loans cheaper.

Parekh’s comments came two days after Finance Minister P Chidambaram said that the competition from PSU banks will force lenders in private sector to cut interest rates sooner than later.

In response to the measures taken by the Reserve Bank of India (RBI) to ease liquidity situation, PSU banks slashed their prime lending rates by 75 basis points, but the private sector banks are yet to make a move in this regard.

Inflation continued to fall for the third week in a row, with declining by 0.06% to 8.84% for the week ended 15 November, which may prompt RBI to ease money supply as demanded by bankers. This may help private sector banks go for a cut in their lending rates.