HDFC Bank Share Price Rises as Savings Rate Cut to 2.75%

Market Performance

On April 15, HDFC Bank's share price increased by nearly 4% following an announcement regarding a change in its savings account interest rate structure. The stock reached an intraday high of ₹1,875.90, approaching its 52-week peak of ₹1,880 in December 2024. Compared to its 52-week low of ₹1,430.15 recorded in May 2024, the stock has appreciated approximately 31%.

Over the last twelve months, the bank's stock has posted a return of 19%. It has continued its upward trend into the current financial quarter, with a 2% gain in April after rising 5.5% in March and 2% in February. This follows a 4% drop recorded in January.

Interest Rate Adjustment

HDFC Bank announced a revision in its savings account interest rates, effective April 12. The interest on deposits below ₹50 lakh has been lowered to 2.75% per annum, marking the lowest rate among major private lenders. The revised rate reflects a 25 basis point cut.

Deposits exceeding ₹50 lakh will now attract a 3.25% interest rate, the first change in that category since June 2020. The announcement comes from the Reserve Bank of India's recent repo rate reductions, signaling a shift toward a more accommodative interest rate environment.

Company Strategy and Positioning

HDFC Bank has maintained a cautious approach toward savings interest rates for over 14 years, avoiding rate hikes in this segment. The bank has emphasized the growth of its fixed deposit portfolio, which offers relatively stable funding.

With the new savings rate structure, HDFC Bank's offering is now lower than those of ICICI Bank and Axis Bank, which currently offer 3% for similar deposits. This move aligns with HDFC Bank's strategy to optimize its cost of funds and potentially support its interest margins, although it may also influence depositor behavior in a competitive landscape.

Following its merger with HDFC Ltd in July 2023, HDFC Bank has intensified its efforts to boost deposit mobilization. The merger had temporarily elevated the bank's credit-deposit (CD) ratio above 100%. The ratio has moderated to 98%, still above the pre-merger level of 85–87%, indicating continued emphasis on expanding its deposit base.

Summary

HDFC Bank revised its savings account interest rate to 2.75% for deposits below ₹50 lakh, effective April 12. This adjustment, the lowest among its major peers, follows a recent trend of falling policy rates. The move resulted in a nearly 4% increase in HDFC Bank's share price, bringing the stock to its 52-week high. Post-merger dynamics and a strategic focus on deposit growth remain central to the bank's current operational approach.