The second largest private sector lender HDFC Bank on Tuesday said it will decide on a possible lending rate cut later this week. "When costs go down, interest rates will go down. That (a rate cut) the Alco (asset liability committee) will decide now," managing director and chief executive Aditya Puri told reporters here today, adding the Alco will meet "by the end of the month."
He said the bank is saving 0.06% as a result of the recent cut in the cash reserve ratio (CRR), which is the amount of deposits banks have to pass with RBI, while there is also additional relief coming in from the 50 bps cut in deposit rates announced recently by the bank.
Signalling a lower interest rate regime, the largest lender State Bank of India last week announced a 0.25% reduction in its base rate or on the minimum rate of lending on the back of cuts in the CRR and statutory liquidity ratio (SLR) or the amount of deposits to be held in G-secs, by the RBI early this month and late July, respectively.
Unlike SBI, which is sitting on an excess SLR of Rs 50,000 crore, Puri said HDFC Bank does not have any additional SLR holding.
To a question on the margins, he said the bank continues to stick to its projection of 4 to 4.2%. HDFC Bank's credit growth is on track, courtesy good demand from retail and working capital segments, Puri said, but added that there are difficulties in demand from the infrastructure and the capital goods sectors.
Asked about the progress on the negotiations between the bank and its parent HDFC over transferring of loans to the bank by the latter, which can be run into problems because of RBI's new securitisation guidelines, Puri said both the entities are "almost there" and an arrangement will be finalised by the end of the month.
On asked about the special dispensation for the ailing discoms announced by the government yesterday wherein nearly Rs1.9 trillion is being restructured, Puri said it is a very positive step.
"Banks should fund a viable enterprise. How long can a bank fund a loss? That is not right. You shouldn't be doing it and that's what they are trying to do (through this CDR package)," he said, stressing that HDFC Bank does not have any exposure to the stressed state-run discoms.
Puri, who had earlier been critical of government inaction on the reforms front and also warned that the country could become Asia's Greece, also welcomed the recent government moves ushering in a slew of reforms in may areas. He said if the reforms continue in the same momentum, the country will clock a growth of over 6 percent this fiscal.
Due to the gloomy factors on the domestic and the international front, a slew of analysts are estimating the growth to fall to the 5.5% levels this fiscal.
The bank announced a tie-up with premium US credit card issuer Diners' Club and launched three co-branded cards targeted at frequent travellers and those indulging in lifestyle spends. The cards, which carry an annual subscription of up to Rs20,000, will be sold both to banks' account holders as well as to outsiders, card business head Parag Rao said.
Puri said the bank holds a 35% share in the cards and electronic payments business with 6 million cards in circulation, 10,000 ATMs and 1.5 lakh merchants. He said the bank witnessed over Rs 50,000 crore of transactions in the segment, with up to 20 percent of it on travel alone.