HDFC Bank CEO Confirms Deposit Mobilisation Shortfall
HDFC Bank's chief executive has openly acknowledged that the bank failed to meet its ambitious deposit growth targets. Sashidhar Jagdishan addressed this issue directly during an earnings call with analysts on Friday. He expressed confidence that continued focus on the bank's core strengths would eventually deliver the desired results.
Current Credit-Deposit Ratio and Future Targets
The bank's credit-to-deposit ratio reached 98.7% in the December 2025 quarter. Chief Financial Officer Srinivasan Vaidyanathan revealed specific reduction targets for this crucial metric. HDFC Bank aims to bring the ratio down to between 92% and 96% during the current financial year. The bank plans further improvement to a range of 85% to 90% by FY27.
Jagdishan emphasized the importance of this reduction for sustainable profitability. He stated that the bank's participation in India's credit growth requires careful funding management at reasonable rates.
Post-Merger Challenges and Industry Context
Before merging with its parent company HDFC, the bank maintained a comfortable credit-deposit ratio of 87-88%. The merger dramatically changed this picture, pushing the ratio to approximately 110%. This increase primarily resulted from HDFC's heavy reliance on borrowings rather than deposits.
The banking industry currently faces a widespread phenomenon where deposit growth lags behind loan growth. This trend particularly affects HDFC Bank given its post-merger position. The bank initially hoped to replace parent company borrowings with low-cost funds based on 2022 liquidity conditions.
Monetary Policy Impact and Current Strategy
Within a month of the merger announcement, the Reserve Bank of India raised the repo rate by 40 basis points. This move aimed to control market volatility following supply disruptions from the Russia-Ukraine conflict. Cumulative tightening eventually reached 250 basis points by May 2022, pushing the repo rate to 6.50%.
Rates remained unchanged until late 2024 when easing began amid declining inflation. Now, with the RBI in a rate-cutting cycle, HDFC Bank faces a dual challenge. The bank must grow deposits faster than loans while simultaneously reducing funding costs. This task becomes more complex because a significant portion of the bank's loan portfolio uses floating interest rates.
Jagdishan confirmed the bank's commitment to gradually lowering its credit-deposit ratio. He described this as an important glide path toward sustainable operations. The bank's leadership remains focused on navigating the uncertain financial environment through strategic adjustments.
