HDFC Bank to grow deposits aggressively, slowdown loan growth

India’s largest private sector lender HDFC Bank on Thursday said that going forward its advances will grow slower than its deposits, as it adjusts to its merger with parent HDFC limited. In his annual address to shareholders, managing director Sashidhar Jagdishan said that the bank will work towards bringing down its credit to deposit ratio, look at prepaying HDFCs borrowings and explore profitable lending sources.

“During this time of adjustment, the bank would grow its advances a little slower than the deposit growth,” Sashidhar Jagdishan, MD, HDFC Bank said in his annual address. His speech was published as part of the annual report. “We will avoid pursuing growth which does not meet our risk adjusted profitability thresholds.”

Jagdishan also said that the bank is working towards bringing down its CD ratio. The credit to deposit ratio of the lender had touched 110%. Prior to the merger the private lender has maintained CD ratio in the range of 85-87%.

“It is our endeavour to bring down the credit to deposit ratio to pre-merger levels and our focus would be to maintain adequate liquidity buffers, repayment of eHDFC borrowings as and when they mature, including weighing any prepayment opportunities that may arise, and pursuing profitable sources of lending,” Jagdishan said.

Reserve Bank of India Shaktikanta Das had recently cautioned banks against exuberance in lending.”The persisting gap between credit and deposit growth rates warrants a rethink by the boards of banks to re-strategise their business plans. A prudent balance between assets and liabilities has to be maintained,” he had said.Jagdishan said that the lender will continue to aggressively open branches in a quest to garner more deposits. The bank added over 900 branches in the year under review.More than half its branches are in the semi urban and rural areas where a physical presence is often a necessity.

“These branches will undoubtedly help garner deposits in the future, but it is the older branches that will act as current engines of deposit mobilisation,” Jagdishan said. “Our experience clearly reveals that there
is an exponential growth in deposit base as the branches age. Our past experience indicates that deposit mobilisation has a strong correlation to the vintage of the branch. The investment in new branches is to ensure that we do not lose out on opportunities for the future while the existing branches continue to drive deposit growth.”

Jagdishan also said that the bank has been able to bring down its attrition rate among junior employees by 10%.

“In FY 2023-24, we saw a drop in new joiner attrition by 10% over last year and the overall attrition drop by over 7%,” Jagdishan said.

He attributed this success to a series of initiatives including setting up a task force at the highest level to identify the controllable causes and taking corrective action.

“Managers are the primary custodians of talent, and much effort has been made to raise awareness and accountability towards retention and engagement of their teams,” he said.

The private lender had faced a lot of flak
after a senior executive at HDFC Bank was caught abusing his colleagues during an online meeting. His video had gone viral on social media, after which the bank had suspended the employee.