As focus shifts to growth, CD ratio moderation unlikely to be ‘very steep’ in FY26: HDFC Bank MD

Sashidhar Jagdishan, Managing Director & Chief Executive Officer, HDFC Bank

As the focus now shifts to growth on both the loan and deposit fronts, private sector lender HDFC Bank is unlikely to see a steep reduction in its credit-deposit (CD) ratio in FY26, Managing Director and CEO Sashidhar Jagdishan said in an investor call.

“Our CD ratio has been brought down from the highs at the time of the merger (of erstwhile HDFC with the bank) — around 110 per cent — to about 96 per cent as of March 2025. Our deposits have grown faster than the system, and our loans as well. Next year, in line with what we committed, the adjustment in CD ratio will not be so steep, supporting loan growth for the bank, though it will remain on a downward path,” he said.

Overall, the bank’s CD ratio is expected to moderate to the pre-merger level of 85-90 per cent by FY27, according to the bank’s management.

In order to lower its CD ratio from pre-merger highs, HDFC Bank, over the last few years, adopted a strategy of going slow on loan growth, opening branches at a record pace to gather retail deposits, and conducting securitisation of loans. In FY25, the bank securitised loans amounting to ₹57,000 crore as a “strategic initiative.” HDFC Bank’s overall advances were up 8 per cent year-on-year to ₹27.73 lakh crore as of March-end. Overall deposits, meanwhile, rose 14 per cent y-o-y to ₹27.14 lakh crore.

Jagdishan said the bank continues to keep funding costs on a ‘tight leash’, and as liquidity and growth improve, the lender is well placed to grow in both assets and deposits. The investments made over the past few years in building digital capabilities should also start reaping benefits for the lender gradually over FY26, he said.

On the exit of former HDFC Bank Head of Commercial and Rural Banking, Rahul Shukla, Jagdishan said it was the executive’s decision to go on sabbatical due to personal reasons. He added that the bank’s Deputy MD, Kaizad Bharucha, now oversees the entire asset side of the balance sheet and the investment banking business.

“We have a very good depth in management. All of them now handle larger businesses and report directly to the Deputy Managing Director. I’m quite excited about this reorganisation, and I’m confident that we will find the most optimal ways to drive growth and unlock synergies across various asset groups. This will also help us optimise resources at the grassroots level and minimise overlap,” Jagdishan said.

Marco economy

Jagdishan said India’s economic growth will be supported by the Reserve Bank of India’s (RBI) decision to cut the repo rate twice by 25 basis points each, and by its signal of further rate cuts, in response to easing headline and food inflation.

“The RBI intends to increase durable liquidity, which is being followed by concrete actions. These measures, along with the rate cuts, will help support GDP growth. For FY26, we expect GDP to be driven by a pickup in rural spending, discretionary consumer demand, and investment activity,” he said.

However, goods exports may take a hit until global trade and tariff fluctuations become clearer. The bank, Jagdishan said, acknowledges that the global macroeconomic outlook has become more uncertain due to recent trade-related tariff measures and the volatility surrounding them.

“This may potentially impact global inflation, leading to lower growth across economies. Corporates have adopted a wait-and-watch stance, and while we are waiting for more clarity, we remain watchful,” he added.

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Published on April 20, 2025

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