There's scope for further cuts in lending rates: HDFC Bank

Country's second largest lender HDFC Bank today said there is a scope for further cuts in the lending rates as loan growth is trailing deposit growth.
"There has been a slight pick-up (in deposit growth) and more importantly deposit growth is outpacing loan growth," HDFC Bank Deputy Managing Director Paresh Sukthankar told reporters here.
He added that this will result in a cut in deposit rates, which are generally a pre-cursor for lending rate cuts.
"It's only when the banks reduce their deposit rates that they can re-calibrate their base rate ... Meaningful movements in base rates would have to follow changes in deposit rates," he said, adding that the general direction of the rates is downward.

Sukthankar said he expects lending rate cuts of up to 0.50 per cent by the RBI in its policy in this fiscal, which will "induce" banks to also effect cuts in their respective lending rates.
HDFC Bank has cut its minimum lending rate twice this fiscal by a cumulative 0.35 per cent to 9.70 per cent, which is one of the most competitive rates among domestic lenders.

On the jump in its provisioning over the last two quarters, Sukthankar said HDFC Bank's asset quality is stable and pointed out that some of it is due to a hike in floating provisions, which can be utilised in the future.

"The growth in provisions is not reflective of any deterioration in underlying asset quality as much as an increase in general provisions and floating provisions," he said.
The bank today launched a mobile van project called 'Dhanchayat', which is aimed at deepening financial literacy in the rural areas. It will specifically work to impress the people to be a part of the formal financial system and drive them away from the clutches of the unorganised money lenders.
Sukthankar said in the first phase of the project, it is targeting to reach out to 5,000 villages across the country with the vans, which will be showing a specially made 9-minute film to the villagers.

On its gold loan exposure in the aftermath of the fall in crisis, Sukthankar said it constitutes only one per cent of the book and the bank has not reviewed its policies.