HDFC Bank eyes faster loan growth, says high credit-deposit ratio not a constraint
HDFC Bank reiterated its intention to accelerate credit growth and deepen India’s participation in the credit cycle, saying the relatively high loan-to-deposit (CD) ratio does not constrain expansion.
CD ratio remains an important measure for sustainable profitability, but it should be viewed over a longer horizon rather than quarter-to-quarter, chief financial officer Srinivasan Vaidyanathan said in the bank’s December quarter (Q3 FY26) earnings call on Saturday.
India’s largest private sector bank’s CD ratio touched 99% as of end-December, up from 98% in the previous quarter. The bank has consistently maintained its guidance to reduce the CD rate to 90% in the near term since its merger with the former Housing Development Finance Corp.
“In the current scenario, we don’t think we’re constrained by the CD rate because we know directionally we’re trying to shift it down. It’s perfectly fine to move up or down quarter by quarter, but when you look at it on an annual basis, the goal is to keep shifting it down as we go forward,” Vaidyanathan said. He said that the goal is to grow in line with the system this fiscal year and faster than the system from now on.
The lender’s gross advances rose 12% annually in the third quarter. ₹28.446 trillion and deposits with an annual increase of approximately 12% ₹28.601 trillion.
On margins, Vaidyanathan refrained from providing a numerical outlook, but said that the Reserve Bank of India’s first 100 basis point repo rate cut was taken into account, but the last 25 basis point cut last month was not yet fully taken into account. “…some of this is factored into the December quarter, and in one to three months some of it will start flowing through the repricing cycle. So some of it will come,” he said.
NIM increased to 3.35%
In the December quarter, the bank’s net interest margin on total assets increased to 3.35% from 3.27% in the previous quarter, and its net interest margin on interest-bearing assets increased to 3.51% from 3.40% in the previous quarter. Net interest income also increased by more than 6% annually. ₹326 billion.
Vaidyanathan said the bank’s cost of funds has fallen by around 10-11 basis points and this trend is expected to continue as earlier policy rate cuts are rolled out.
He laid out three key factors that will shape net interest margins going forward: cost of funds, CASA trends and borrowings. He explained that term deposit repricing significantly delayed asset repricing, with changes in deposit interest rates continuing for four to five quarters.
He also noted the potential for improvement in CASA as interest rates fall. “As rates start to fall, the tendency for savings accounts to recover will increase,” he said, citing evidence from previous interest rate cycles.
Borrowings, which currently account for around 13% of HDFC Bank’s liability mix (above the historical average), act as another lever for margin improvement as tenors get shorter and the gap between borrowing and deposit costs narrows.
Separately, the bank remains focused on expanding its physical footprint, with plans to continue adding branches. With approximately 9,600 branches accounting for just 6% of the country’s total branch network, management said branch-led growth remains a key enabler for deposits, personal loans and deeper customer relationships.
