HDFC Bank's Strategic Shift: Deposits Outshine Loans

In a significant development, HDFC Bank has reported that its deposit base has exceeded its loan portfolio for the first time following the merger with its parent housing finance company in July 2023. This milestone was disclosed in the bank's Q3 FY25 business figures filed with the stock exchanges.

The bank's strategy to slow down advances growth, while focusing on deposit accumulation, has led to this achievement. As of December 31, 2024, HDFC Bank's deposits stood at Rs 25.6 lakh crore, marking a 15.8% increase from the previous year. Meanwhile, gross advances saw a modest growth of 3%, reaching Rs 25.4 lakh crore.

Industry Trends and Future Projections

Despite the bank's deposit growth outpacing the industry average, its advances growth is slower, aligning with the bank's long-term strategy. MD & CEO Sashidhar Jagdishan outlined the bank's approach during the Q2 FY25 earnings call, indicating a phased strategy to align with system growth rates by FY27.

Term deposits have seen a significant rise, reaching Rs 16.9 lakh crore by the end of December 2024, a 22.7% increase from the previous year. This shift towards time deposits reflects customer preferences in a high-interest rate environment.

Looking Ahead

With period-end advances under management at Rs 26.8 lakh crore, HDFC Bank is navigating through a strategic transformation. The bank's focus on retail and commercial loans, alongside a decline in corporate loans, indicates a diversified approach to growth and risk management.