HDFC Bank will maintain a healthy loan to deposit ratio (LDR), managing director and chief executive Sashidhar Jagdishan said on Monday. Speaking at an investor conference hosted by Goldman Sachs, he said there is a need to mobilise sustainable deposits in order to replace maturing bonds.
“Going forward, whatever we will do, will be very similar to what we have done in the past, which means we will maintain a very healthy incremental LDR.
HDFC Bank’s LDR has increased after its merger with HDFC Ltd and is currently at 110%, which is higher than the industry average. Prior to the merger, the LDR of the country’s largest private bank was at 85%. Talking about the liquidity coverage ratio, Jagdishan said the bank has always operated between 110% and 120%, which is a very healthy level.
“There is a need to mobilise sustainable deposits in order to replace maturing bonds,” he said. “We realise that we have preponed our loan growth, and so we need a transition time to warm up the engine to raise that amount of equivalent granular sustainable funding to be able to substitute some of the bond maturity.” He added said this will help the bank match its share of loans and deposits.
HDFC Bank shares have come under pressure due to a slower growth in deposit which has put pressure on its profit margins.
HDFC Bank currently has a 14-15% market share in loans and a 11-12% share in deposits, said Jagdishan. After the merger, HDFC Bank got access to a large loan book from its home finance arm. In comparison, the lender has a smaller deposit book.
Jagdishan termed the RBI’s action of barring Paytm Payments Bank as unfortunate acknowledging that Paytm has a robust technology platform, which HDFC Bank is leveraging through a partnership. Paytm and HDFC Bank have an arrangement for FASTags, which Jagishan said had a reasonable market share. “Now, that may get distributed among a lot of other entities.”
