HDFC Bank shares climb 4% as lender slashes savings rate to 2.75%, lowest among peers

Shares of HDFC Bank surged nearly 4 percent on Tuesday, April 15, after the private sector heavyweight announced a cut in its savings account interest rate to 2.75 percent for deposits below ₹50 lakh. The revision, effective from April 12, brings HDFC Bank’s offering below that of key competitors, marking the lowest savings rate among large private sector lenders.

As per the bank’s website, the interest rate has been reduced by 25 basis points. Deposits exceeding ₹50 lakh will now earn an interest of 3.25 percent per annum. Notably, this is the first such revision by the bank in this slab since June 2020, during the COVID-19 pandemic. The rate cut comes on the heels of the Reserve Bank of India’s second successive repo rate reduction this year, signaling a softening rate environment.

HDFC Bank has maintained a conservative stance on savings rates for over a decade. Over the past 14 years, it has refrained from increasing its savings account interest, focusing instead on growing its fixed deposit base. The bank has long encouraged customers to park excess funds in term deposits, which offer better returns and serve as a more stable funding source for the lender.

With this latest move, HDFC Bank's savings rate now undercuts those of ICICI Bank and Axis Bank, both of which currently offer 3 percent for savings deposits below ₹50 lakh. While the rate reduction could help HDFC Bank lower its cost of funds and support net interest margins, it may also raise concerns among depositors amid stiff competition from peers and fintech-led alternatives offering higher yields.

The bank’s strategic focus on deposit mobilisation has intensified post its landmark merger with HDFC Ltd in July 2023. The merger led to a surge in its credit-deposit (CD) ratio, which briefly crossed the 100 percent mark. Though the ratio has since moderated to 98 percent, it remains above the pre-merger range of 85–87 percent, necessitating a sustained effort to expand its deposit base.

Stock Price Performance

Following the announcement, HDFC Bank shares climbed 3.8 percent to hit an intraday high of ₹1,875.90, just shy of its 52-week peak of ₹1,880 touched in December 2024. From its 52-week low of ₹1,430.15 in May 2024, the stock has rallied around 31 percent.

Over the past year, the bluechip banking stock has returned 19 percent. It has also continued its recent upward trajectory, rising 2 percent in April so far, after gaining 5.5 percent in March and 2 percent in February. However, the scrip had posted a 4 percent decline in January.