
India’s largest private sector lender, HDFC Bank, announced a strategic shift in its growth approach due to its merger with parent HDFC Limited. Managing Director Sashidhar Jagdishan, in his annual address to shareholders, revealed that the bank’s advances will grow slower than its deposits. This adjustment aims to bring down the bank’s credit to deposit (CD) ratio and explore profitable lending sources.
Strategic Adjustments Post-Merger
Sashidhar Jagdishan highlighted the bank’s focus on reducing its CD ratio, which had reached 110%. Before the merger, HDFC Bank maintained a CD ratio between 85-87%. Jagdishan emphasized the importance of maintaining liquidity buffers, repaying HDFC borrowings as they mature, and pursuing profitable lending opportunities. He stated, “We will avoid pursuing growth which does not meet our risk-adjusted profitability thresholds.”
Regulatory Guidance
Reserve Bank of India Governor, Shaktikanta Das, recently cautioned banks about excessive lending. He stressed the need for a balance between credit and deposit growth rates, urging banks to re-strategize their business plans. “A prudent balance between assets and liabilities has to be maintained,” he remarked.
Expansion of Branch Network
HDFC Bank plans to continue its aggressive expansion strategy by adding more branches to boost deposits. Over 900 branches were added in the past year, with more than half located in semi-urban and rural areas where physical presence is crucial. Jagdishan pointed out that older branches play a significant role in deposit mobilization due to their vintage. “Our past experience indicates that deposit mobilization has a strong correlation to the vintage of the branch,” he explained.
Reducing Employee Attrition
The bank has successfully reduced its attrition rate among junior employees by 10% in the fiscal year 2023-24. This achievement is attributed to initiatives aimed at addressing controllable causes of attrition and raising awareness among managers about retention and engagement. “Managers are the primary custodians of talent,” Jagdishan noted, emphasizing their role in maintaining a committed workforce.
Addressing Workplace Issues
HDFC Bank faced criticism after a senior executive was caught abusing colleagues during an online meeting. The incident, which went viral on social media, led to the suspension of the involved employee. The bank has since taken steps to improve its workplace environment and address such issues proactively.