HDFC Bank to grow loan book slower than deposits, focus on reducing CD ratio

HDFC Bank will be growing its advances slower than the deposits, and focus on getting the credit-deposit ratio to the pre-merger levels, according to a top bank official.

In the annual report of the country's largest private sector lender, its managing director and chief executive Sashi Jagdishan suggested that profitability will also be a core aspect of its strategy.

Jagdishan said the bank which merged its home loan-focused parent HDFC Ltd with itself last July is passing through a phase of "adjustment" where it will be focusing on adequate liquidity buffers, and repaying HDFC's borrowings on maturity and also before that.

"During this time of adjustment, the Bank would grow its advances a little slower than the deposit growth," he said in the message to shareholders.

The bank will endeavour to bring down the credit-to-deposit ratio to the pre-merger levels, Jagdishan said, adding that it will continue to focus on granular deposit mobilisation on the back of the distribution strengths.

It can be noted that the system as a whole is struggling with deposit growth unable to keep pace with the credit growth, and as per reports, the regulator has also flagged concerns on the high CD ratios at banks.

"We will avoid pursuing growth which does not meet our risk-adjusted profitability thresholds, in line with the Bank's philosophy," he added.

Jagdishan also said that approximately 85 per cent of the incremental home loan disbursals are now being done to customers having an HDFC Bank account, as against approximately 30 to 35 per cent before the merger.

"Our ability to build a strong liability franchise leveraging home loan customers is well on its way to fruition," he said.

The bank will now focus on leveraging the cross-sell opportunity of both, the bank and the group's products to these customers, by way of seamless technology-enabled customer journeys and a value proposition that attracts the customers, he said.

The MD said more than three-quarters of the bank's acquisitions are digitally driven at present, with straight-through processing leading to paperless experiences.

Jagdishan was paid a total remuneration including allowances and perquisites and a performance bonus of Rs 10.79 crore, which is a notch higher than the Rs 10.55 crore he earned in FY23.