Banks see strong deposit growth in Q3, outpaced by rapid credit expansion

On the rise

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HDFC Bank's credit-deposit metrics

HDFC Bank has been steadily bringing down its elevated CD ratio following its merger with erstwhile mortgage lender HDFC Ltd, which became effective in July 2023. Following the amalgamation, the CD ratio had crossed 110 per cent, compared with an average of around 85 per cent prior to the merger.

To address the spike, the bank deliberately moderated credit growth in FY25. It has guided that growth will broadly track the banking system in FY26, before accelerating to outpace system-wide expansion and gain market share in FY27.

In the current environment, when HDFC Bank says it wants to grow above system levels in FY27, there is “no way” it will be even close to 90 per cent, because practically it is “a near-impossible equation” to achieve, said Suresh Ganapathy, head of financial services research at Macquarie Capital. “We expect the increase in the loan-deposit ratio to provide some cushion to margins in the near term, against loan repricing on account of rate cuts.”

Despite the strong business performance, HDFC Bank shares fell 2.35 per cent to close at ₹977.70 on Monday, while the broader indices declined just 0.4 per cent.