HDFC Bank MD Sashidhar Jagdishan: Advances to Grow Slower Post-HDFC Merger, Focus on Reducing Credit-Deposit Ratio

India's largest private sector lender, HDFC Bank, announced plans for its advances to grow at a slower pace than deposits following its merger with HDFC Limited. Managing Director Sashidhar Jagdishan emphasized the bank's focus on lowering its credit-to-deposit ratio and prepaying HDFC’s borrowings in his annual address to shareholders.

Key Points from Sashidhar Jagdishan's Address:

1. Slower Advance Growth: The bank aims to slow down the growth of its advances relative to its deposits during this adjustment period. Jagdishan highlighted that this strategy aligns with the bank’s goal of maintaining risk-adjusted profitability thresholds.
2. Credit-to-Deposit Ratio: HDFC Bank's credit-to-deposit ratio had reached 110% post-merger, compared to a pre-merger range of 85-87%. The bank plans to bring this ratio back to pre-merger levels by maintaining liquidity buffers, repaying HDFC borrowings as they mature, and seeking profitable lending opportunities.
3. RBI’s Caution: RBI Governor Shaktikanta Das recently warned banks against aggressive lending, stressing the importance of a balanced approach between assets and liabilities. Jagdishan echoed this sentiment, indicating that HDFC Bank will prioritize prudent growth.
4. Branch Expansion: HDFC Bank added over 900 branches in the last year, with a significant number in semi-urban and rural areas to boost deposit mobilization. Jagdishan noted that older branches play a critical role in deposit growth, and the new branches are investments for future opportunities.
5. Attrition Rate Reduction: The bank has successfully reduced attrition rates among junior employees by 10% and overall attrition by over 7% in FY 2023-24. This improvement is attributed to initiatives to identify and address controllable causes of employee turnover. Managers have been made more accountable for retaining and engaging their teams.

Conclusion:

HDFC Bank is focused on maintaining a balanced and sustainable growth strategy post-merger with HDFC Limited. By prioritizing the reduction of its credit-to-deposit ratio, expanding its branch network, and enhancing employee retention, the bank aims to strengthen its position in the financial sector while adhering to prudent risk management practices.