HDFC Bank to reach pre-merger credit-deposit ratio in FY27, focus on expansion, distribution

Slogan: “Balancing Growth and Stability: HDFC Bank’s Roadmap to Financial Resilience”

In the dynamic landscape of Indian banking, HDFC Bank stands as a beacon of strategic foresight and resilience. Following its landmark merger with Housing Development Finance Corporation (HDFC Ltd.) in July 2023, the bank has been navigating the complexities of integrating operations while maintaining financial stability. A key focus area has been the restoration of its credit-deposit (CD) ratio to pre-merger levels of 85–90% by FY27. This article delves into HDFC Bank’s comprehensive strategy to achieve this target, emphasizing its commitment to expansion, distribution, and sustainable growth.

Understanding the Credit-Deposit Ratio and Its Significance

The credit-deposit ratio is a critical indicator of a bank’s liquidity and financial health. It measures the proportion of a bank’s loans to its deposits, reflecting how effectively the bank is utilizing its funds. A higher ratio indicates more loans are being disbursed compared to deposits, which can strain liquidity, while a lower ratio suggests a conservative lending approach. Post-merger, HDFC Bank’s CD ratio surged to 110%, necessitating a strategic recalibration to bring it back to a sustainable range.

Post-Merger Challenges and Strategic Response

The merger with HDFC Ltd. significantly expanded HDFC Bank’s loan portfolio, leading to a disproportionate increase in the CD ratio. Recognizing the need for balance, the bank prioritized deposit mobilization over aggressive loan growth. As of March 2025, the CD ratio had moderated to 96.5%, a notable improvement from the immediate post-merger figure. Chief Financial Officer Srinivasan Vaidyanathan emphasized the bank’s commitment to restoring the CD ratio to 85–90% by FY27, aligning with pre-merger levels. :contentReference[oaicite:0]{index=0}

Strategic Initiatives for Achieving Targeted CD Ratio

HDFC Bank’s roadmap to restoring its CD ratio encompasses several strategic initiatives:

Deposit Mobilization: The bank has intensified efforts to grow its deposit base, focusing on retail and low-cost deposits. In Q4 FY25, deposits rose by 14.1% year-on-year to ₹27.15 trillion. :contentReference[oaicite:1]{index=1}
Calibrated Loan Growth: Loan growth has been moderated to ensure alignment with deposit growth. Gross advances increased by 5.4% year-on-year to ₹26.44 trillion in the same period. :contentReference[oaicite:2]{index=2}
Expansion of Distribution Network: The bank has expanded its branch network, adding over 1,000 branches in the last 12 months, enhancing its reach and deposit mobilization capabilities. :contentReference[oaicite:3]{index=3}
Loan Securitization: To manage balance sheet growth, HDFC Bank has increased its loan securitization activities, selling ₹57,000 crore worth of loans in FY25. :contentReference[oaicite:4]{index=4}

Projected Financial Metrics

Analysts project that HDFC Bank’s strategic initiatives will lead to a compound annual growth rate (CAGR) of 15% in deposits and 13% in loans over FY26–FY27. This growth trajectory is expected to support the bank’s goal of achieving a CD ratio of 85–90% by FY27. :contentReference[oaicite:5]{index=5}

Focus on Expansion and Distribution

Beyond financial metrics, HDFC Bank is committed to expanding its footprint and enhancing distribution channels:

Branch Network Expansion: With over 80% of branches now capable of servicing accounts from the merged entity, the bank is well-positioned to serve a broader customer base. :contentReference[oaicite:6]{index=6}
Digital Infrastructure: Investments in digital platforms are enhancing customer experience and operational efficiency, supporting the bank’s expansion goals.
Product Diversification: The bank continues to diversify its product offerings, catering to varied customer needs and driving growth.

Quote

“We accelerated the correction in the CD ratio during a period when industry-wide loan growth was slowing. It was an appropriate time to realign our balance sheet.”
— Srinivasan Vaidyanathan, CFO, HDFC Bank

Frequently Asked Questions

Q1: What is the significance of the credit-deposit ratio?: A1: The credit-deposit ratio indicates how much of a bank’s deposits are utilized for lending. A balanced ratio ensures liquidity and financial stability.
Q2: How is HDFC Bank planning to restore its CD ratio?: A2: The bank is focusing on deposit mobilization, calibrated loan growth, expanding its distribution network, and increasing loan securitization to restore the CD ratio to 85–90% by FY27.
Q3: What are the projected growth rates for HDFC Bank’s deposits and loans?: A3: Analysts project a CAGR of 15% in deposits and 13% in loans over FY26–FY27. :contentReference[oaicite:7]{index=7}