HDFC Bank to grow advances a ‘little slower’ than deposits to bring down credit-deposit ratio

Mumbai: In an effort to bring down its credit-deposit ratio to pre-merger levels and pursue profitable growth, HDFC Bank will grow its advances a “little slower” than deposits and avoid pursuing growth which does not meet the risk-adjusted profitability thresholds, according to MD and CEO Sashidhar Jagdishan.

“Our focus would be to maintain adequate liquidity buffers, repayment of erstwhile HDFC borrowings 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,” Jagdishan said in the bank’s annual report for FY24.

“There has been a lot of discussion around our Net Interest Margin (NIM) and credit to deposit ratio post our merger as well as the path we would pursue, given the scale of deposit mobilisation required for our growth needs,” he said, adding that the bank will continue to focus on granular deposit mobilisation leveraging on inherent distribution strengths.

The erstwhile Housing Development Finance Corp. (HDFC) merged with HDFC Bank from  1 July 2023.

Also Read: Is HDFC Life a new competitor to the mutual funds industry?

The merger has presented the bank with a massive opportunity to grow in the mortgage space, not only through increased home loan disbursals but also by leveraging customer engagement with the cross-sell opportunities, Jagdishan said. The share of HDFC Bank’s savings account customers in incremental home loan disbursals has increased to 85% from around 30-35% pre-merger.

While the bank’s ability to build a strong liability franchise leveraging home loan customers “is well on its way to fruition”, the bank will now focus its energies on leveraging the cross-sell opportunity of both, the bank and the group’s products to these customers.

“While we remain committed to an open architecture model, we do expect to distribute more of the subsidiaries investment and insurance products, leading to an increase in fee income,” he said.

Also Read: SBI vs HDFC Bank: Which blue-chip lender should you pick for long term?

Further, the bank will continue to focus on branch expansion to mobilise deposits. The lender added over 900 branches in FY24 and plans to add more in the current financial year. More than half the branches are in the semi-urban and rural areas.

“These phygital branches are our investments. They will undoubtedly help garner deposits in the future, but it is the older branches that will act as current engines of deposit mobilisation. Our experience clearly reveals that there is an exponential growth in deposit base as the branches age,” Jagdishan said, adding that the investment in new branches is to ensure that the bank does not lose out on future opportunities.

Jagdishan said that the bank is aiming to shift from a ‘product-centric approach’ to a ‘customer-centric one’ through technology-based transformation. As of date, over three quarters of the bank’s acquisitions are digitally driven with paperless processing.

The bank’s mobile application PayZapp now has over 7.5 million registered customers, whereas SmartHub Vyapar has 1.6 million. The corporate banking platform CBX has over 130,000 customers with over 20 million transactions registered in the previous month.

On elevated levels of attrition in the banking sector, Jagdishan said that in FY24 the bank saw a 10% on-year drop in new joinee attrition and a 7% fall in overall attrition. He added that the bank continues to invest in upskilling its talent base of over 200,000 employees.