HDFC Bank Shakes Up Savings Game: Interest Rate Drops to 2.75%

In a major step, HDFC Bank, India's largest private sector lender, has lowered its savings account rate by 25 basis points to 2.75% from April 12. This is the lowest among private banks and in line with the public sector giants SBI and PNB. The rate for balances over ₹50 lakh is now 3.25%, reduced from 3.5%.

The move follows the Reserve Bank of India's recent repo rate cut, as banks readjust their funding plans to maintain margins. Through this move, HDFC Bank hopes to nudge depositors to move to higher-yielding term deposits, a step that could assist the bank in better managing its net interest margins.

This cut also tracks a general trend in depositor behavior, where savings accounts are being seen more as transactional means than long-term savings instruments. The trend towards fixed deposits and mutual funds for superior returns has already cut into the proportion of low-cost CASA deposits in banking.

For HDFC Bank depositors, this shift highlights the need to seek alternative investment avenues to garner superior returns in a low-interest-rate scenario.

Source: The Economic Times