All segments of the business grew, barring lending against shares. Interest expenses surged reflecting rising cost of funds for a bank that was built on low-cost deposits.

The bank forecast its loans, revenues and profits to grow higher than the industry average in the fourth quarter as most banks slow lending amid rising bad loans. But did not provide specific target. Provisions for bad loans, contrary to most other banks, declined.

Net profit for the December quarter rose to Rs 1,429 crore, from Rs 1,090 crore a year ago, the bank said. Net interest income - the difference between interest earned and interest expended - grew 12.2% to Rs 3,116 crore.

"When the economy is slowing down, banks become cautious," said Paresh Sukthankar, executive director, HDFC Bank. "We will remain slightly ahead of the growth in the system." Other banks "have their ways to evaluate and will continue to be cautious".

For HDFC Bank, it has become a custom to report about 30% growth in earnings with little surprise. But investors are now closely watching its cost of funds after the Reserve Bank of India freed interest rates on savings bank deposits. HDFC Bank's extraordinary performance for more than a decade was attributed to its ability to access low-cost funds in the form of 'so called' current account savings account (CASA) deposits. Now, that may be under threat with many rivals such as Yes Bank and Kotak Mahindra raising rates on such deposits by more than 50%.

"The increase in term deposit rates is visible in the profit and loss account with interest expenses going up sharply," said an analyst, who did not want to be identified. "Year-on-year the current and saving account growth has seen a marginal dip. This is not a matter of concern since the flow of savings has been towards term deposits."

Interest expenses rose 67% to Rs 4,087 crore, and its CASA, adjusted for one-off current account balance, fell to 47.7%, from 50.5% a year earlier.

But the bank that added 2.28 lakh customers last quarter does not plan to compete with rates. "We don't see any change in savings rate," said Sukthankar. "We believe saving rate is in line with the actual cost of servicing the savings account."

Other income grew, which is revenue from non-fund based activities such as commission, fees, earnings from derivative transactions and from investments, by 26% to Rs 1,420 crore. Fees and commissions went up 19.6% to 1,127.6 crore. Also, foreign exchange and derivative revenues was at Rs 365.6 crore, up from Rs 216.8 crore.