Lending rates can come down if Reserve Bank of India cuts rates further: HDFC Bank

HDFC Bank, the country's second largest private sector lender, said there was room to bring down lending rates further if the Reserve Bank of India (RBI) revises the repo rate (the rate at which it lends to banks) further.

Moreover, since the deposit growth is outpacing loan growth, there could be scope to bring down the base rate, said Paresh Sukthankar, deputy managing director, HDFC Bank.

"It is true that deposit growth has been muted. There has been a slight pick-up and more importantly deposit growth is outpacing loan growth. So, when you look at it in relation to each other, there is probably some room for deposit rates to come down and I think that would be the case in some months. Meaningful movements in base rates would have to follow changes in deposit rates," said Sukthankar.

In the April-June quarter, according to the Reserve Bank of India, data credit in the banking system has declined by 2.5 per cent whereas deposits declined by 1.26 per cent. In FY15, credit to the industry grew at the slowest pace in the last 17 years at only 9.52 per cent.

A cut in deposit rates is generally followed by a cut in lending rates. HDFC Bank's base rate currently stands at 9.7 per cent.

Sukthankar said in this financial year, there was scope to cut the repo rate by another 25-50 basis points (bps).

"General direction of interest is downwards, (but) timelines on whether you would see a cut in this policy or little later, that is something I won't hazard a guess on. Through the fiscal, we'd see 25-50 bps of cuts," he added.

RBI has already reduced the repo rate by 75 bps in this calendar year.