MUMBAI: HDFC Bank MD & CEO Sashidhar Jagdishan said that the banking landscape had changed dramatically after the lender decided to merge parent HDFC with itself in April 2022, but the bank was not apologetic about the decision.
In a candid admission of how things have not gone according to plan because of the change in the global economic situation, Jagdishan said that given the benign environment, the bank had factored in a certain growth rate, but the landscape changed from benign liquidity to one where liquidity was very tight. He was speaking at the bank’s annual general meeting on Friday.
A month after the merger decision in May 2022, RBI announced a 40-basis point (100bps = 1 percentage point) hike in the repo rate — the first of a series of hikes that added up to 250bps. The rate hikes were in response to rising commodity prices in the wake of the Ukraine invasion. RBI also drained surplus liquidity that increased the cost of deposits for banks and hit HDFC Bank particularly hard as it had to raise deposits not just for incremental growth but to cover the assets of erstwhile HDFC. Jagdishan said that besides the policy environment there was also a shift in consumer preferences which were moving toward mutual fund, equities and even real estate.He reiterated the bank’s thrust on branch expansion and said that branch density in India was lower than in the developed world and the bank would continue to add more branches to focus on deposit growth which would be much more than deposit growth.
“It is in economic interest of the institution, to try and ensure that the deposit growth is much greater than the credit growth, and even if it means for a period of time, we have to slow down credit growth. We can then enjoy the benefits of the cycle moving back upwards at the appropriate time,” said Jagdishan. On the bank’s focus on brick and mortar outlets, Jagadishan said, “The branch is wonderful platform to engage with customers. You will still see bank branches in New York and London.”
