Private lender, HDFC Bank does not follow the PSU banks on reducing its benchmark lending rate or PLR. The bank refused to cut interest rates till the time its cost of funds come down.
HDFC Chairman Mr Deepak Parekh said: "Cost of funds is still high. So once it comes down, we will reduce interest rates."
Nevertheless the deposit rates are all set to come down as most public sector banks have already declared a 100 basis points cut in their term deposits of different maturities. Peak deposit rate of most banks are expected to fall around 9.50%.
On November 27th, public lender Punjab National Bank has announced a second round of cut in its PLR by 100 basis points to 12.5% from 13.5%. The bank has also reduced its fixed deposit rates by 25-100 basis points. The cut in PLR is expected to reduce the interest rate charged in auto, home and other commercial loans and make them available at cheaper rates to the customers.
RBI has been continuously taking measures to ease liquidity in the system and in response to these measures most PSU banks have decreased their prime lending rate by 75 basis points. Even the private lenders are expected to follow the suit.
Finance Minister Mr. P Chidambaram said that private sector banks will be forced to cut down their rates in order to compete with the public banks. However two days after this comment, Mr Parekh's declared that HDFC will hold interest rates for the time being.