How did HDFC Bank manage the highest ever deposit growth in Q3? Here’s what experts say

HDFC Bank, India’s largest private sector lender, recorded the highest ever quarterly deposit growth for any bank in the third quarter ended December 31.

The bank’s deposits grew 19.9 percent to Rs 17.3 lakh crore from Rs 14.4 lakh crore in the year-ago period.

How did the bank achieve such high credit growth in a tough market?

Analysts said the bank’s strong hold across multiple segments alongside its wide franchise network helped it grow with record numbers.

“HDFC Bank remains one of the few banks to clock a strong deposit growth amid rising competition for deposits, given its robust franchise,” said Anand Dama, senior research analyst at Emkay Global Financial Services.

Segment growth

Current account and savings account (CASA) deposits grew by 12 percent, with savings account deposits at Rs 5.3 lakh crore and current account deposits at Rs 2.2 lakh crore.

The lender’s time deposits grew to Rs 9.7 lakh crore, jumping 26.9 percent over the corresponding quarter of the previous year.

Analysts said HDFC Bank’s wider branch network aided in the mop-up of deposits.

“With plans to boost up its network and services, the bank is opening a lot of new branches and making inroads in the rural areas,” said Karan Gupta, banking analyst at India Ratings & Research, a Fitch Group company.

Dama said the bank’s large corporate relationship network enables it to present its products and services to various customer segments.

“The bank’s wider network takes it to newer market and customer segments. Its range of outreach programmes has boosted the bank’s overall growth,” Dama said.

Can the lender sustain deposit growth momentum?

Analysts said the bank has consistently recorded almost 20 percent (YoY) and 4 percent quarter-on-quarter (QoQ) deposit growth and will largely stay on the same path.

Attributing this to the bank’s plans for branch expansion and a race for competitive rate hikes, experts said it is unlikely that the deposit growth momentum will slow.

Gupta said, “With the bank looking to double its branch network over a three-year period, this will work as a major booster for deposit growth. Hence, we do not see any possible challenges for its deposit growth.”

To attract new customers, HDFC Bank hiked rates on fixed deposits for different tenures across customer segments in December. The bank now provides interest rates ranging from 4.5 percent to 7.75 percent.

“The bank has been one of the few players to clock a strong overall deposit growth given its robust franchise, and has now increased rates to accelerate deposit growth in the run-up to the merger,” said Dama.

HDFC Bank expects to amalgamate its home loan major parent HDFC into itself by September.