HDFC Bank raises deposit rates by 0.4% - 0.75%

The majority of its retail fixed deposit rates were increased by 40–75 basis points (bps) on Wednesday by India's largest private lender, HDFC Bank Ltd. This move makes it the newest major bank to take similar action to encourage sluggish deposit growth.

As a result of depositors choosing to invest their money in mutual funds and shares in order to earn higher returns in the face of high inflation, growth in bank deposits has substantially lagged loan growth, raising concerns for the central bank.

In the meantime, lenders are engaged in a "deposit rate war" as a result of decreasing liquidity and increasing credit demand.

The largest lender in India by assets, State Bank of India, increased deposit rates on Tuesday by 15 to 100 basis points across all tenors, while smaller private-sector rival Kotak Mahindra Bank increased fixed deposit rates by up to 7%.

According to the most recent central bank figures, during the two weeks ending November 18, deposit growth at Indian banks was 9.6% y/y, while loan growth was 17.2%.

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