HDFC Bank, India’s largest private sector lender, announced its intention to grow its loan book at a slower pace than the industry in the current financial year (FY25). This strategy aims to reduce the bank's elevated credit-deposit (CD) ratio to pre-merger levels. Sashidhar Jagdishan, Managing Director and CEO of HDFC Bank, indicated that the bank would expedite efforts to lower the CD ratio, projecting that by FY26, it may align with the system growth rate, with faster growth anticipated in FY27. In Q2, HDFC Bank reported a year-on-year (Y-o-Y) credit growth of 7%, below the system average, alongside a 1% sequential decline. This drop is attributed to the bank’s ongoing divestment of the former HDFC Ltd.’s corporate book and retail portfolio. Conversely, deposits surged by 15% Y-o-Y and 5% sequentially, bringing the CD ratio to approximately 100%, down from 110% post-merger and around 87% pre-merger. Srinivasan Vaidyanathan, CFO of HDFC Bank, noted that while it was initially expected to take 4-5 years to reduce the CD ratio, current credit growth trends suggest a more accelerated timeline of 2-3 years. The bank is positioning itself to capitalize on potential shifts in the credit environment. Jagdishan emphasized the bank’s focus on maintaining stable asset quality to effectively navigate future market changes and to reclaim the growth levels seen before the merger. Regarding credit strategy, the bank is actively promoting mortgage lending, which strengthens customer relationships, while moderating growth in the non-mortgage retail segment due to credit dynamics. The management has also adjusted growth in larger ticket loans due to pricing pressures. Despite lower credit growth compared to the overall system, HDFC Bank mobilized over ?1.2 trillion in deposits during Q2, with around ?1 trillion in time deposits. Jagdishan noted a continued preference for time deposits amid high interest rates, resulting in a healthy average growth rate of 15% Y-o-Y, with retail branches contributing 84% of total deposits. The bank reported a 5% Y-o-Y profit growth to ?16,821 crore, with net interest income (NII) increasing by 10% Y-o-Y to ?30,114 crore. The net interest margin stood at 3.46%, while gross NPAs slightly rose to 1.36%. “We are observing an uptick in retail disbursements, and although it will take time to reflect in the overall book, we are prepared to capture the right customer segments at competitive prices, remaining vigilant of market conditions,” Jagdishan concluded.