The asset liability committee(Alco) of HDFC Bank might decide to cut interest rate in its upcoming meeting later this week, the private sector lender's managing director & chief executive Aditya Puri said.

Speaking to reporters, Mr. Puri said, "When costs go down, interest rates will go down. The Asset Liability Committee will decide by how much the base rate will go down."

HDFC Bank's current base rate stands at 9.8 per cent, just five basis points above State Bank of India's 9.75 per cent.

State Bank of India, the state-owned largest lender in India, last week reduced its base rate or the minimum rate of lending by 0.25 per cent. The state-owned lender announced reduction in base rate on the back of reduction in the cash reserve ratio (CRR) by the Reserve Bank of India (RBI).

Mr. Puri said that HDFC Bank was saving 0.06 per cent as a result of the cut in the CRR, which can be described as the amount of money that banks have to deposit with the central bank. However, he admitted that HDFC didn't have any excess SLR holding like State Bank of India, which is sitting on an additional SLR of Rs 50,000 crore.

He also said that the growth of HDFC Bank's credit was on track, thanks to good demand from retail and working capital sectors. However, he admitted that the bank was facing difficulties in demand from the capital goods and infrastructure segments.

Responding to a question on the margins, Mr. Puri said that the private sector lender continued to stick to its projection of 4-4.2 per cent.