HDFC Bank’s credit growth is expected to be slower than the overall banking sector growth rate in the current financial year, according to MD and CEO Sashidhar Jagdishan during an analyst call. However, credit growth is expected to accelerate in the next financial year, likely matching the growth rate of the banking system, and may surpass it in FY2027.
“In FY25, we would probably grow slower than the system. FY26 we may be at or around the system growth rate, FY27 we should be faster than the system growth rate,” said Jagdishan, explaining the trajectory of credit growth. “Our assumption is that from all the regulatory comments in the monetary policy statements, there will be a convergence of system loan growth and deposit growth rates somewhere during this period,” he added.
The bank’s management has previously stated its intention to grow advances at a slower pace than deposits it aims to pursue profitable growth without sacrificing asset quality and reduce its elevated credit-deposit (CD) to pre-merger levels.
After its merger with mortgage lender HDFC, the bank received a large pool of mortgage loans to its portfolio but a much smaller amount of deposits, taking its CD ratio above the 100% mark. Before the merger, its CD ratio was at 85% and the lender had maintained the ratio at 85-87% over a long period. The bank’s CD ratio stood at around 100% at the end of the second quarter of the current fiscal.
The bank’s management also does not expect any significant impact on its profit margins due to cut in repo rate by the Reserve Bank of India and expects to protect its net interest margin (NIM) in the medium term.
“Our view is that we should not have too much of an impact in the range at which we have been operating the margins in the near term,” said Jagdishan. “We have been operating in a certain tight range, I think that should be maintained,” he added.
The bank’s NIM remained stable at 3.5% in the second quarter of this year compared to 3.4% in the same quarter a year ago.
The bank will continue to expand its presence by opening new branches across the country as it will help to mobilise deposits.
“Our approach has been to grow branches, to go into more areas where we need reach, but even in cities to make it much denser so that we could capture all the customers that are possible,” said Jagdishan. “Despite intense competition and the competitive environment, deposit growth has been very healthy. On an average basis, we have grown around 15% year-on-year, and the retail branch continues to contribute around 80% to 85%,” he said.
Total deposits of HDFC Bank rose 15% from last year to Rs 25 lakh crore. Current account, savings account deposits accounted for 35.3% of total deposits, as of September 30.