HDFC Bank sees 5-10 bps I-CRR impact on net interest margins, says CFO Vaidyanathan

The reported net interest margins (NIM) of the HDFC Bank was at 3.4 percent on total assets in the July-September quarter

HDFC Bank Chief Financial Officer (CFO) Srinivasan Vaidyanathan on October 16 said that the bank has seen a 5-10 basis points (bps) impact of Incremental Cash Reserve Ratio (I-CRR) on their net interest margins in the July-September quarter.

“Impact of I-CRR on NIMs was around 5 to 10 basis points,” Vaidyanathan said during an earnings call.

The reported net interest margins (NIM) of the HDFC Bank was at 3.4 percent on total assets in the July-September quarter.

Core net interest margins of the bank in the reporting quarter were at 3.65 percent on total assets and 3.85 percent on the interest earnings asset, a press release from the company said.

On August 10, the RBI asked scheduled banks to maintain an I-CRR of 10 percent on the increase in their net demand and time liabilities (NDTL) between May 19 and July 28.

The measure was intended to absorb the surplus liquidity generated by various factors, including the return of Rs 2,000 notes to the banking system.

The central bank, on September 8, took the decision to discontinue the I-CRR in a phased manner, after the review. It added that the amount under I-CRR would be released in stages so that system liquidity is not subjected to sudden shocks and money markets function in an orderly manner.

On September 8, the central bank said that 25 percent of the funds maintained in the I-CRR would be released on September 9 and 25 percent on September 23. The remaining 50 percent will be released on October 7.

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Even after the complete reversal of I-CRR, liquidity in the banking system remained tight. This was due to tax outflows such as goods and services tax and advance tax payment.

As of October 15, liquidity in the banking system was in a deficit of over Rs 18,000 crore, as per RBI’s money market data.

Further Vaidyanathan said the bank has taken certain calls on liquidity management for the coming quarters.

Earnings numbers
HDFC Bank reported a net profit of Rs 15,976.11 crore in the July-September quarter, which was up just over 50 percent on-year, in its first report since its merger with Housing Development Finance Corp (HDFC).

On a sequential basis, net profit rises 33.7 percent.

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Net profit beat the estimates of the brokerage. According to the average of five brokers’ estimates, HDFC Bank is expected to register a net profit of Rs 14,780 crore rising by 39.4 percent year-on-year (YoY).

The rise in net profit of the bank was aided by the improvement in the net interest income and net revenue of the bank.