The main question is who decides the interest rates? Rbi? Sbi? Hdfc bank?

Obviously all 3 options are wrong. Like everything else, it is the market which decides the interest rates.

Remember Interest is the price that a borrower has to pay to the lender to ‘use’ his money for a period of time. So if I as a seller decide NOT to loan my money at a rate less than 12% p.a. and ALL LENDERS decide to do that, the borrowers will have to pay that. If on the other hand if ALL THE BORROWERS decide not to pay more than 10% pa that would be the interest rate. Actually the market decides to have a tug of war between the buyer and the seller and the rates settle somewhere in between. If the RBI had allowed NSE (and Nse had seized the initiative) we would have had a bustling debt retail market and I could have told you ‘9% p.a. is the retail rate for a 10 year bond’. Sadly we do not have a nice retail debt market, so we go by signals from the wholesale market.

So it is a myth that RBI sets the interest rates. It does not. It cannot. 

There is a huge misunderstanding that the RBI has a policy and it has a process for setting the long term interest rates. Neither RBI nor the FED control the long term interest rates!  The Reserve Bank of India controls the overnight interest rate. It can set this rate with precision because, remember that the RBI is the monopolist of reserves. But the RBI sets the overnight rate based on the state of the economy. If the economy is weak and inflation is low then the Rbi sets low rates. The Central bank of any country is just trying to assess the state of the economy and act according to the requirement of the economy at that point in time.