HDFC Bank’s Sashidhar Jagdishan said the lender is going through “adjustments”
Business: HDFC Bank MD and CEO Sashidhar Jagdishan said the bank has “no regrets” about the merger despite the challenges. Jagdishan admitted the bank was going through an “adjustment phase” but exuded confidence of “breaking out” once this period is over. “The adjustment will take some time before we can break out like we have in the past,” Jagdishan told shareholders at the bank’s annual general meeting. He said the merger, announced in April 2022, was done under the assumption of a stable economic environment. However, the situation quickly changed with the Reserve Bank of India (RBI) raising the repo rate by 40 basis points just a month later, taking the total to 250 basis points. These rate hikes, driven by global inflationary pressures and the fallout from the Ukraine conflict, have tightened liquidity, raising the cost of deposits for banks. This has particularly hurt HDFC Bank, as it has had to raise deposits not only for growth but also to cover the expanded asset base from the merger. “So today, what we are will be different from what we had anticipated when the merger was announced,” Jagdishan acknowledged.
The CEO also pointed to a shift in consumer preferences,
with more individuals being attracted to mutual funds, equities and real estate. In response, the bank is ramping up its branch expansion to boost deposit growth, which Jagdishan stressed should outpace loan growth. “It is in the economic interest of the institution to try to ensure that deposit growth is far higher than loan growth,” he said. As the bank adjusts to the new realities, Jagdishan said its loan-deposit ratio, which is currently 104%, needs to come down. Despite the immediate challenges, he assured shareholders that the long-term benefits of the merger will outweigh short-term difficulties. Echoing this sentiment, HDFC Bank Chairman Atanu Chakraborty called the merger one of the most important and complex mergers in Indian corporate history, which will strengthen the bank’s growth trajectory in the future. Jagdishan also highlighted positive developments in the bank’s internal dynamics, with the employee attrition rate declining from 34% in the previous year to 27% in FY24.
