HDFC Bank MD Sashidhar Jagdishan Disappointed with June Quarter Deposit Growth Amid CASA Volatility

HDFC Bank’s managing director, Sashidhar Jagdishan, expressed disappointment over the bank’s deposit growth for the quarter ending in June. During an analyst call following the release of the bank’s first-quarter results on Saturday, Jagdishan mentioned that the bank was caught off guard by the volatility in current account flows.

Strategy

“I know that deposits are the most crucial part of our strategy. Are we happy with the numbers? Not really. They fell short of our expectations. This isn’t new, but we were surprised by the unexpected flows in the current account at the period’s end,” Jagdishan said.

As of June 30, the bank’s total deposits were ₹23.79 lakh crore, a 24.4% increase year-on-year. However, gross advances grew much faster, rising 52.6% to ₹24.87 lakh crore. This gap between credit and deposit growth is a concern for the Reserve Bank of India (RBI), which has flagged it for the entire banking sector.

CASA Deposits

HDFC Bank’s current account savings account (CASA) deposits grew 6.2% year-on-year in April-June, with savings account deposits at ₹5.96 lakh crore and current account deposits at ₹2.67 lakh crore. CASA deposits are a low-cost source of funds for banks.

Chief Financial Officer Srinivasan Vaidyanathan added, “In March, we received ₹54,000 crore in current account deposits, but we saw a rundown of ₹43,000 crore in June. Despite this, we remain the largest current account bank, with current accounts making up 11% of our total deposits, down from 14% in March.”

Focusing on period-end numbers

The bank, which merged with HDFC Limited in July 2023, reported a net profit of ₹16,170 crore for April-June, up 35.3% year-on-year. Jagdishan emphasized that the bank’s teams would focus on daily basics to avoid performance-related pressures from focusing on period-end numbers.

“The deposit momentum is actually increasing across multiple products, which is a very healthy trend,” Jagdishan said.

Annual Report

In HDFC Bank’s recent annual report, Jagdishan stated that the bank plans to increase advances at a slower pace than deposits to bring down its credit-deposit (CD) ratio. The CD ratio shows the portion of fresh deposits being given out as loans.

While the RBI has not prescribed a specific CD ratio for the bank, Jagdishan mentioned it was in HDFC Bank’s best interest to lower it. “We aim to reduce the CD ratio gradually, though it might not be practical to achieve this in just one year,” he said.

Following the merger, HDFC Bank’s CD ratio jumped to 105% as of March 31, 2024, from around 85% previously, due to inheriting many mortgage loans but fewer deposits from HDFC Limited.

“Outflows in the current account and the rundown of ₹16,000 crore in non-retail deposits from HDFC Limited have resulted in a tepid net accretion at the period’s end,” Jagdishan concluded.