Puri hinges lending rate cut to more reduction in CRR

Mumbai: The second largest private sector lender HDFC Bank is not mulling slashing of interest rates as of now, and will do so in future only if there are more CRR cuts.

"As far as reduction in interest rate is concerned, if there is more CRR cuts, it will happen. Because, given the inflationary environment, we can`t reduce the deposit. Also, the call rates are high due to shortage of liquidity," managing director and chief executive Aditya Puri told PTI.

He also said if the RBI cuts the cash reserve ratio by another 100 basis points in next one month, banks will start slashing their base rates. "In my opinion, if the RBI cuts CRR by 100 bps…the banking system on its own will reduce interest rates. So, CRR is more important at this point of time than policy rate cuts."

On March 10, Reserve Bank had reduced CRR by an unexpectedly high 75 basis points. In the January policy too, the central bank had cut the ratio of cash balance that banks park with the RBI by 50 bps.

However, at both the times, the RBI left the policy rates unchanged. Puri said if oil prices had not risen, then we might have already seen a rate cut. "Naturally, the inflation numbers, which depend on oil prices to a large degree, will be the guiding factor for a policy rate cut," Puri said.

He also said NPA is not a matter of concern for his bank, with no or minimal exposure to sectors like power, aviation and telecom. "We are not in the non-performing sectors.. we are not exposed to the airlines sector, we are not exposed to the power sector, especially to projects where coal supply is not assured. Even, our exposure to telecom comprises only those companies which had got licence before 2008."

About net interest margin (NIM), he said it will remain in the current range in the near future. HDFC Bank, which had a net interest margin of 4.1 percent in the third quarter, posted a 31.2 percent rise in its net income at Rs 1,429 crore against Rs 1,090 crore year ago.