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HDFC Bank, following its merger with HDFC Ltd in July 2023, is strategically recalibrating its operations with a clear objective: to restore its credit-deposit (CD) ratio to pre-merger levels of 85-90% by fiscal year 2027. This ambitious goal underscores the bank's commitment to balanced growth, prioritizing deposit mobilization to outpace loan disbursements. The merger, a landmark event in the Indian financial sector, has necessitated a comprehensive reassessment of the bank's financial structure and operational strategies. The bank's leadership, particularly Chief Financial Officer Srinivasan Vaidyanathan, has articulated a clear roadmap focused on intensifying deposit growth through strategic expansion of the distribution network and aligning deposit rates competitively with the broader market. The bank's recent performance indicates positive momentum in this direction, with the CD ratio improving to 96.5% in the March-ended quarter, a significant reduction from the post-merger peak of 110%. This improvement reflects the bank's proactive measures to manage liquidity and optimize its balance sheet. Vaidyanathan emphasized that as liquidity improves and the Indian economy continues to grow, HDFC Bank is well-positioned to capitalize on opportunities for both deposit and loan growth. The bank's standalone financial results for the March quarter showcased a robust performance, with a net profit of ₹17,616 crore, up from ₹16,512 crore a year earlier. Net interest income (NIM) also rose impressively by 10.3% year-on-year to ₹32,070 crore, supported by a modest expansion in the net interest margin to 3.5% and a healthy 5.4% increase in gross advances. These figures demonstrate the bank's ability to generate strong earnings while navigating the complexities of a post-merger environment. In response to the Reserve Bank of India's (RBI) recent interest rate cuts, HDFC Bank has taken the lead in adjusting its savings rates, reducing interest on savings account deposits by 25 basis points and fixed deposits by up to 50 basis points. These rate adjustments are a strategic move to manage funding costs and realign the credit-deposit ratio to pre-merger targets. The bank's total deposits have experienced substantial growth, rising by 14.1% year-on-year to ₹27.1 trillion as of March 31, 2025. Term deposits have seen particularly strong growth at 20.3%, while current and savings account (CASA) deposits have risen by 3.9%, resulting in a CASA ratio of 34.8%. The bank's deposit market share currently stands at 11.1%, with its extensive distribution footprint accounting for 6% of the industry total. Notably, deposit accretion per branch has surged to ₹300 crore, a significant increase from ₹80 crore last year, highlighting the effectiveness of the bank's branch network and customer acquisition strategies. Vaidyanathan highlighted the bank's success in gaining market share, emphasizing its deepening reach in semi-urban and rural areas. This expansion is crucial for tapping into new customer segments and further boosting deposit growth. The bank aims to replicate its pre-merger performance, when it typically operated with a CD ratio between 85-90%.
While deposit growth is currently taking precedence, HDFC Bank anticipates that loan growth will align with system-level growth in FY26 after lagging behind in FY25. The bank projects to surpass market growth in FY27, thereby regaining its market share in lending. To effectively manage loan growth and secure adequate funding, HDFC Bank plans to continue securitizing its assets over the next three to five years. This approach will provide the bank with the necessary flexibility to grow at a faster pace while capitalizing on emerging market opportunities. By securitizing loans, the bank can optimize its funding and maintain a healthy balance sheet. Gross advances increased by 5.4% year-on-year to ₹26.4 trillion as of March 31, 2025. Retail loans demonstrated strong growth at 9%, while commercial and rural banking loans rose by an impressive 12.8%. However, corporate and other wholesale loans experienced a decline of 3.6%. These figures reflect the bank's strategic focus on retail and rural lending, which are seen as key growth drivers in the current market environment. Mortgage loans constitute 30% of the bank's total loan book, with other retail loans accounting for 19-20%, commercial and rural banking comprising approximately 33%, and corporate and wholesale loans making up 16–17%. Vaidyanathan noted that the greatest growth potential currently lies in retail lending, given its relatively low credit penetration. This indicates that there is significant headroom for expansion in the retail segment. The bank's physical network has expanded significantly, now comprising 9,455 branches and 21,139 ATMs across 4,150 cities, compared to 8,738 branches and 20,938 ATMs in 4,065 cities a year earlier. This expansion underscores the bank's commitment to increasing its accessibility and reach to customers across the country. The growth in branches and ATMs is particularly important for attracting new depositors and supporting the bank's overall deposit growth strategy. HDFC Bank's strategic initiatives, including deposit rate adjustments, distribution network expansion, and a focus on retail and rural lending, are designed to achieve its goal of restoring its credit-deposit ratio to pre-merger levels. The bank's strong financial performance and its commitment to balanced growth position it well to navigate the challenges and opportunities in the evolving Indian financial landscape.
HDFC Bank's post-merger strategy is deeply rooted in a comprehensive understanding of the Indian financial landscape and the evolving needs of its diverse customer base. The emphasis on deposit growth is not merely a short-term tactical response but a fundamental element of the bank's long-term strategic vision. By prioritizing deposit mobilization, HDFC Bank aims to create a stable and sustainable funding base that will support its lending activities and enable it to capitalize on future growth opportunities. The decision to align deposit rates competitively with the broader market is a calculated move to attract and retain customers in a highly competitive environment. While the bank acknowledges that there is no significant rate-related advantage over its peers, it remains confident that its strong distribution network, customer acquisition capabilities, and commitment to customer engagement will drive market share gains. The expansion of the distribution network, particularly in semi-urban and rural areas, is a key component of HDFC Bank's growth strategy. By increasing its physical presence in these regions, the bank can tap into new customer segments and expand its deposit base. The surge in deposit accretion per branch, from ₹80 crore to ₹300 crore, is a testament to the effectiveness of the bank's branch network and its ability to attract new depositors. The focus on retail and rural lending reflects HDFC Bank's recognition of the significant growth potential in these segments. Retail lending, in particular, is seen as a key driver of future growth, given its relatively low credit penetration. By expanding its retail loan portfolio, the bank can cater to the growing demand for consumer credit and contribute to the overall growth of the Indian economy. The bank's commitment to securitizing its assets is a strategic move to manage loan growth and secure adequate funding. By securitizing loans, HDFC Bank can free up capital and reinvest it in new lending opportunities. This approach will enable the bank to grow at a faster pace while maintaining a healthy balance sheet and managing its risk profile effectively. In summary, HDFC Bank's post-merger strategy is a well-defined and comprehensive plan that is designed to restore its credit-deposit ratio to pre-merger levels and drive sustainable growth in the years to come. The bank's commitment to deposit growth, distribution network expansion, and a focus on retail and rural lending position it well to navigate the challenges and opportunities in the evolving Indian financial landscape and solidify its position as the country's largest private sector lender. The proactive management of interest rates and the strategic use of asset securitization further demonstrate the bank's commitment to prudent financial management and sustainable growth.
Source: HDFC Bank to reach pre-merger credit-deposit ratio in FY27, focus on expansion, distribution