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Informist, Saturday, Jul. 18, 2026

 

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--HDFC Bank: Expect to see more retail, short-term loans in Jul-Sept 
--CONTEXT: Comments by HDFC Bank management in post-earnings analyst concall 
--HDFC Bank: Margin spreads on corporate book remain thin 
--HDFC Bank: Weather disruptions, West Asia war remain risks on horizon 
--HDFC Bank: Better cost of funds can support margins going forward 
--HDFC Bank: India's liquidity scenario needs to be different 
--HDFC Bank: Need deviation between highest and lowest liquidity to be minimal 
--HDFC Bank: Appointing a new director is among the other key goals of bank 
--HDFC Bank: FCNR (B) deposits expected to pick up in current month 
--HDFC Bank: In relentless pursuit of CASA and timed deposits 

 

By Vaishali Tyagi and Kabir Sharma

 

NEW DELHI – HDFC Bank expects foreign currency non-resident bank deposits to pick up in July, the second month after the policy announcement, as the first is usually spent on internal approvals and coordination with partner banks, the mangement of India's largest private sector lender said in an analyst call post its earnings on Friday. While specific numbers couldn't be disclosed, the endeavour was to achieve a strong and significant market share, the management said, adding that the FCNR(B) policy window offered to the banking system was a great opportunity for banks. 

 

The management further said that the bank aimed to corner a significant portion of the overall system mobilisation, as it did during 2014-15 (Apr-Mar). "Definitely if the system is 'X', we will be a significant portion of the system," the management said. "The entire team is quite 'gung-ho' to mobilise that (FCNR(B) deposits), we are all energised and I think we are on track towards that. We are just commencing the drive...while demand is there, we just don't want to commit any number," the management said. "Let it start to flow and you will see it."

 

After the Reserve Bank of India launched the scheme, Indian banks and certain foreign lenders have increased interest rates on dollar deposits under the FCNR(B) scheme. The RBI's swap window allows lenders to price these deposits on par with domestic liabilities. Several Indian and foreign banks have hiked rates by over 300 basis points in some cases. In June, the regulator did away with caps on offering deposit rates, which was seen as a push to maximise inflows.

 

The lender reported a net profit of INR 190.60 billion for Apr-Jun, compared to INR 181.55 billion a year ago. The net profit missed analysts' estimate by over INR 2 billion. On Friday, shares of HDFC Bank ended at INR 819.60 on the National Stock Exchange, up 1.4% over Thursday. 

 

On margins, the private sector lender's management said improved cost of funds could support margins going forward. Multiple factors need to play out for margins to decline. "Cost of funds is the biggest opportunity on the margin," the management said. The bank's net interest margin on total assets was at 3.26%, down 12 basis points from 3.38% a quarter ago. 

 

Further, the management siad that the country's liquidity scenario needs to be slightly different from what it is. "For example, even in the recent quarter, the average liquidity in the system was about INR 2.08 trillion. However, the peak was INR 5.5 trillion and the drop was a negative INR 0.43 trillion," the management said. "There is a big difference between the peak and the drop. We need that standard deviation to the average to be minimal so that there could be an active market where the rate can stabilise well." Margins will also depend on deposit costs, particularly non-retail deposit costs. Further, the management said that the margin spread on corporate book remains thin.

 

On the business front, the bank's management said it anticipates a rise in retail and short-term loans in the near term. "I'm sure we have a stronghold in the corporate segment, but even on that, with the implementation of new technologies over a period of time, we have been prioritising more of the retail and MSME segment," the managment said. "We will also sort of see a change in terms of the wallet sharing." Gross advances rose 15.4% on year to INR 30.61 trillion as on Jun. 30. Retail loans of the bank rose 7%, while small and medium enterprise loans and corporate loans grew 19% in the reporting period.

 

The management added that there was good traction in the system on the mid-market and corporate side. The bank has a strong franchise and market leadership in this segment, which is expected to continue contributing going ahead.

 

Other drivers on the retail side include newer products such as gold loans, which have started contributing. While this is still a small part of the overall retail book, it is growing well. The bank has also started micro loans under its 'Dukandar' lending, which is helping build core retail.

 

On risks, weather-related disruptions such as El Nino and the geopolitical situation in West Asia remain monitorables, the management said. "I think the country has weathered these reasonably well. I think we continue to remain very sanguine. We are prepared as a country and hence as a company in terms of weathering any such challenges in the near future."

 

On the composition of the lender's board, the management said the board is working toward enhancing the number of full-time directors. The bank has several milestones, including the appointment of a new chairman. The management said, "...a fair amount of action will be visible in a short time period and I would like to wait for the same."

 

The Emergency Credit Line Guarantee Scheme 5.0 is also seen as a good opportunity and is expected to drive growth in the mid-market segment. The management said competition remains intense, especially on the corporate side. On liabilities, it said that while there was continued focus on current account savings account deposits, including current accounts from retail and merchant customers, term deposits also present a large opportunity. Only 14% of the bank's customers currently have term deposits, indicating significant scope for deeper penetration. Total deposits of the bank rose 14.7% to INR 31.71 trillion at the end of June.  End

 

Edited by Avishek Dutta

 

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