HDFC Bank Charts New Course with Focus on Credit-Deposit Ratio and Profitability

HDFC Bank is adjusting its strategies post-merger with HDFC Ltd, prioritizing a balance in advances and deposits while focusing on profitability. Managing Director Sashi Jagdishan highlights the importance of maintaining liquidity, repaying borrowings, and leveraging cross-sell opportunities through seamless digital processes. The bank aims to achieve risk-adjusted growth amidst industry-wide deposit growth challenges.

HDFC Bank is poised to grow its advances at a slower pace compared to deposits, with an aim to restore the credit-deposit ratio to its pre-merger state, a top official stated.

In the annual report, Managing Director and CEO Sashi Jagdishan emphasized profitability as a core strategy element. The bank, which merged with HDFC Ltd last July, is in an 'adjustment' phase, focusing on maintaining adequate liquidity buffers and repaying borrowings both at and before maturity.

'During this adjustment period, the Bank will grow its advances slower than deposit growth,' Jagdishan wrote to shareholders. He noted that the bank will strive to reduce the credit-to-deposit ratio to pre-merger levels while continuing to focus on granular deposit mobilization leveraging its distribution strengths.

The banking system is grappling with deposit growth lagging behind credit growth, a concern flagged by regulators due to high credit-deposit ratios. Jagdishan insisted that the bank will avoid growth that doesn't meet risk-adjusted profitability thresholds, in line with its philosophy.

Post-merger, about 85% of incremental home loan disbursals are to customers with HDFC Bank accounts, up from 30-35% before the merger. 'Our ability to build a strong liability franchise using home loan customers is succeeding,' Jagdishan said.

The focus now is on exploiting cross-sell opportunities for both the bank's and the group's products, aided by technology-enabled seamless customer experiences and attractive value propositions.

Jagdishan also highlighted that over three-quarters of the bank's acquisitions are digitally driven, ensuring paperless transactions via straight-through processing. He received a total remuneration of Rs 10.79 crore, slightly higher than the previous year's Rs 10.55 crore.

(With inputs from agencies.)