HDFC Bank Ltd is set to see a period of slower advances growth, as it works toward adjusting its credit-deposit ratio. In his message to shareholders in the FY24 annual report MD & CEO Sashidhar Jagdishan said that the lender's endeavour is to bring down its credit-deposit ratio to pre-merger levels.
"The bank will continue to focus on granular deposit mobilisation leveraging our inherent distribution strengths and the execution focus that we are known for," Jagdishan told shareholders.
India's largest private sector lender will look at maintaining adequate liquidity buffers, repayment of borrowings by Housing Development Finance Corporation as and when they mature, including weighing any prepayment opportunities that may arise, and pursuing profitable sources of lending.
"During this time of adjustment, the Bank would grow its advances a little slower than the deposit growth. We will avoid pursuing growth which does not meet our risk adjusted profitability thresholds, in line with the Bank’s philosophy," Jagdishan said.
According to provisional quarterly data released by the bank earlier this month, advances remained flat sequentially at Rs 24.87 lakh crore as of June 30. Its deposits as of June 30 too remained flat quarter-on-quarter at Rs 23.8 lakh crore. This implies a credit-deposit ratio of over 100%.
The bank has struggled to maintain a healthy credit-deposit ratio after its merger with HDFC, which resulted in a large home loan book being added to the lender's advances portfolio.
The slower credit growth which Jagdishan is referring to will likely result in lower net interest margins, as the bank tries to rebalance its books. As of March 31, NIM stood at 3.44%, while NIM on an interest earning basis was at 3.6%.
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