India’s largest private sector lender HDFC Bank is undergoing a period of “adjustment” which may lead to slowing down of credit growth, but will “break out” soon, its managing director Sashidhar Jagdishan said on Friday. Jagdishan added that the bank was focused on bringing down its credit-to-deposit ratio.
“We are on the right path as we are building this new organization and navigating through this new environment, macro environment, he said while answering shareholder’s questions at the bank’s 30th Annual General Meeting. “I think we were well aware that a period of adjustment is happening. That adjustment will take a little bit of time before we can sort of break out as we have done in the past.”
Jagdishan added that it was in the economic interest of the institution to try and ensure that the deposit growth is much greater than the credit growth.
“Even if it means for a period of time we have to slow down the credit growth or bring down the credit deposit ratio, it is in our interest to do it as quickly as possible because post that, post reaching a certain level, I think then we can enjoy the benefits of this cycle moving back upwards at that appropriate time,” he said.
In the June quarter, deposit growth was slower than loan growth with liabilities rising 24.4% over last year to Rs 22.83 lakh crore, underscoring a broader concern of the central bank. Advances had grown 52.6% on year with total loan book at Rs 24.8 lakh crore.
The bank’s credit deposit (CD) ratio stands at 104 per cent, and the lenders has in the past spoken about bringing down the ratio
“The literature that has come out from the regulator is very appropriate to say that the deposit growth should be much, much greater than the (loan) growth in the system,” he said. “And hence, the nudge to ensure that the financial institutions are adequately liquid in this kind of a changing business cycle is appropriate for the financial stability of the system.”
