India’s largest private sector lender, HDFC Bank, has reduced its savings account interest rate by 25 basis points, bringing it down from 3% to 2.75% for deposits up to ₹50 lakh. For balances above ₹50 lakh, the interest rate has been cut from 3.5% to 3.25%. This change came into effect shortly after the RBI cut its repo rate by 25 basis points, lowering it to 6% on April 9, 2025.

The move is aimed at lowering the cost of funds for the bank and protecting its margins, especially as the system transitions from a liquidity deficit to a surplus.

Why Did HDFC Bank Cut the Rate?

The rate cut reflects two key factors:

  1. Alignment with RBI’s monetary policy: The central bank’s decision to lower interest rates signals a shift towards easing, encouraging banks to follow suit.
  2. Confidence in deposit inflows: HDFC Bank is confident in continuing to attract deposits despite offering lower interest rates.

Changing Customer Behaviour and Banking Trends

Interestingly, HDFC Bank has not increased its savings rate for the past 14 years. It reflects a broader shift across the Indian banking sector. Over the years, customers have increasingly started treating savings accounts as transactional tools rather than vehicles to grow their money. Instead, fixed deposits (FDs) have become the preferred choice for earning better interest on surplus funds.

As a result, banks like HDFC have slowly been moving away from relying heavily on low-cost CASA (Current Account Savings Account) deposits. Even though savings deposits offer instant liquidity, the banks’ ability to cut rates shows how customer behavior and interest rate cycles are changing strategies across the industry.

Broader Market Impact

HDFC Bank is not alone in adjusting rates. Several banks have made similar moves recently:

  • Yes Bank reduced FD rates by 25 bps.
  • Bandhan Bank cut savings account rates from 6% to 3–5%.
  • Bajaj Finance lowered FD rates by 0.25% for longer terms.
  • Bank of India withdrew its 400-day special deposit scheme that offered 7.3%.

These changes point to a wider recalibration of deposit strategies in anticipation of a softening interest rate environment.

Market Reaction: HDFC Bank Stock Performance

Investors reacted positively to the rate cut news. On April 15, 2025, HDFC Bank shares rose by 3.7%, trading at ₹1,873.8 apiece on the NSE at 12:00 PM, making it one of the top gainers on the Nifty 50 index.

This boost is likely due to expectations that lower savings rates could ease margin pressure and improve the bank’s profitability in a lower interest rate environment. 

Let’s take a look at its Factor Analysis:

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