CD ratio won't constrain HDFC Bank's loan growth aspirations: MD Jagdishan

HDFC Bank said its elevated credit-deposit ratio will not constrain loan growth, while reiterating a glide path to bring it down to 85-90 per cent by FY27

Despite its credit-deposit (CD) ratio topping 98 per cent in the third quarter of financial year 2026 (Q3FY26), HDFC Bank has indicated that the elevated ratio will not constrain loan growth in FY26, with growth expected to match the industry, and outpace it in FY27. At the same time, India’s largest private lender reiterated its commitment to bring its CD ratio down, targeting a range of 90-96 per cent by the end of FY26 and 85-90 per cent by FY27 — levels broadly in line with its pre-merger average.

 

“Under the current scenario, we do not think that we shall be constrained by the CD ratio. To reiterate, we are confident that it will be on a downward glide path. I would also like to reiterate that we shall meet the glide path that we had indicated earlier in terms of our top line growth, which is in line with the system this financial year (FY26) and faster than the system in the next financial year (FY27),” said Sashidhar Jagdishan, MD & CEO, HDFC Bank, in a call with analysts following the banks’ Q3 results.

 

The banks’ advances grew nearly 12 per cent year-on-year (Y-o-Y) in Q3FY26. Its deposits grew 11.6 per cent Y-o-Y. After several quarters, the bank reported loan growth higher than deposit growth. Accordingly, there was a 60 basis points (bps) sequential increase in the CD ratio of the bank, which stood at 98.5 per cent. The bank's share price has tanked over 6 per cent since it released its Q3 business update, which showed CD ratio spiking again as credit growth was higher than deposit growth. 

 

“I think the credit growth build up has been extremely encouraging. We set our sights on a very balanced credit across customer segments. The easing rate cycle and the benign credit has provided catalysts for the credit growth. The CRR release enabled credit deployment slightly ahead of our expectations,” Jagdishan said, adding that when it comes to funding through deposits, the bank continues to maintain rate discipline, and that has been extremely key. 

 

“We did, however, fall short of our strong ambitions, but we are confident that continued focus on our strengths will bring the expected outcomes,” he said. 

 

The bank has been steadily bringing down its elevated CD ratio, following its merger with erstwhile mortgage lender HDFC Ltd in July 2023. To address the spike in the CD ratio — peaking at around 110 per cent — the bank deliberately moderated its growth in FY25. 

 

The bank has guided that it would grow broadly in line with the banking system in FY26, and thereafter accelerate growth to outpace system-wide expansion, and gain market share in FY27.

 

“The easing cycle with credit growth focus in the country surely needs our participation. The speed of CD ratio movement depends on how we are able to provide funding in the system at rational rates,” Jagdishan said.

 

He also highlighted that while there is no regulatory threshold of CD ratio, the bank aims to bring down the elevated ratio to pre-merger levels.

 

“We had said that we will come to a certain number in FY25 which we achieved. We will try and be in a range of  90-96 in FY26, and then maybe by FY27 by the natural growth, and even with the growth in the way we are expecting in terms of faster growth rate, I think we should land somewhere around the 85 to 90 for FY27,” he said. CD ratio is an important focus for the bank for sustainable profitability, he added.

 

Commenting on how the bank will manage deposit growth to fund the credit expansion it is eyeing for FY26 and FY27, Jagdishan said, the pace at which the bank is growing deposits is in line with the top line growth — over 11 per cent.

 

“The foundations are in place to build deposits to fund loan growth. We continue to expand our customer base. We are now intensifying customer engagement primarily, and largely focused on granular mobilisations. We are aligning pricing with a segmented approach and we shall see that in the coming quarters as well,” he said.