HDFC Bank walks loan tightrope

HDFC Bank Ltd performed well in Q3FY25 but reported a high loan-deposit ratio (LDR) of 98%, indicating less-than-ideal liquidity to cover urgent fund requirements.

- Manish Joshi

The lender wants to grow its advances in line with industry levels in 2025-26 and higher than industry levels the following year. That will be difficult given HDFC Bank's focus on lowering its LDR to 90%.

Assuming a deposit growth rate of 15% in FY26, similar to that in Q3FY25, the bank's on-book advances can grow by 10%. HDFC Bank aims to expand its loan book faster than the industry in FY27, but to do that it would have to sell down its loan book to lower its LDR.

In Q3FY25, HDFC Bank's core net income—net interest income (NII) plus fee-based income—rose 10% year-on-year (y-o-y) to ₹38,853 crore. Thanks to a 19% hike in fee income to ₹8,200 crore, the bank overcame the adverse impact of high LDR on loan growth.