HDFC Bank’s deposits have been growing at an impressive pace, outpacing its loan book by 2.5 times and outperforming the overall banking industry.
HDFC Bank’s Deposit Advantage
According to CEO and MD Sashidhar Jagdishan, HDFC Bank’s deposit growth is significantly ahead of the industry average. This robust growth highlights the bank’s strong financial standing and effective strategies.
Despite having only 5% of the total bank branches nationwide, HDFC Bank remarkably holds 11% of all banking deposits. Last financial year, the bank captured a significant 14.6% of all new deposits within the system, showcasing its strong market penetration.
Strategic Balance Sheet Management
The bank has been actively working to optimize its financial structure. Jagdishan noted focused steps to reduce its credit-to-deposit (C-D) ratio and lessen reliance on high-cost borrowings.
A key aspect of this strategy is disciplined pricing. HDFC Bank has not aggressively offered higher rates to attract funds, whether for loans or deposits. This approach indicates a focus on quality growth over quantity.
By the end of FY 2024-25, high-cost borrowings were successfully brought down to just 14% of the bank’s total funding mix. This is a crucial improvement in its financial health.
Improving Credit-to-Deposit Ratio
The bank’s credit-to-deposit ratio, which measures how much a bank lends from its deposits, significantly improved. It dropped to 96% as of March 31, 2025.
This marks a considerable improvement from a peak of around 110% seen at the time of the bank’s merger. This rebalancing indicates a more sustainable lending model.
Jagdishan explained that the bank took a “measured approach” to loan growth during FY25. This was done specifically to realalign its balance sheet, ensuring disciplined pricing and a focus on quality over sheer volume.
Looking Ahead: India’s Economic Prospects
Beyond the bank’s internal performance, Jagdishan expressed strong confidence in India’s economic future. He believes that despite global challenges, India is set to remain the fastest-growing large economy worldwide.
He highlighted several positive factors for the bank, including the successful integration of merger synergies, the improved credit-to-deposit ratio, and strong deposit mobilization efforts. He used a cricketing analogy, stating, “last year we focused on taking singles. Now, we’re ready to go for the boundaries.”
Potential Risks on the Horizon
However, Jagdishan also cautioned about potential domestic risks that could affect the economic environment. These include a slower-than-expected recovery in consumer demand and inflation driven by weather-related disruptions.
Globally, he flagged financial market volatility stemming from uncertainties, rising geopolitical tensions, and trade policy risks. These factors could complicate the overall economic outlook.
- HDFC Bank’s deposits grew 2.5 times faster than its loans in the last fiscal year.
- The bank captured 14.6% of all new deposits in the system last FY.
- Its credit-to-deposit ratio improved significantly, dropping to 96% from a post-merger peak of 110%.
- HDFC Bank maintained disciplined pricing and did not offer higher rates to attract funds.
- The CEO is optimistic about India’s economic growth but cautious about domestic and global risks.
This strong deposit growth positions HDFC Bank well for future expansion and stability, despite a watchful eye on broader economic challenges.
