HDFC Bank Navigates Funding Costs, Eyes Stability

HDFC Bank commenced the first quarter of fiscal 2027 with positive business momentum, according to its management. The lender reported continued market-share gains in deposits and improved branch productivity, stemming from prior investments. Despite facing pressure from funding costs and a changing deposit composition, the bank is prioritizing customer relationships and franchise expansion.

The focus remains on enhancing deposit growth, which has shown resilience compared to previous first quarters. HDFC Bank aims to restore its Current Account and Savings Account (CASA) ratio closer to pre-merger levels, which stood around 40%. Management acknowledged that recent years have seen higher growth in time deposits compared to low-cost funds, impacting the CASA ratio. Efforts are underway to attract more customers and expand distribution reach.

Regarding margins, the bank views a full-year perspective as more relevant than short-term fluctuations. While cost of funds presents the most significant opportunity for margin improvement, changes are anticipated to occur gradually. HDFC Bank currently serves over 100 million customers and is strategically working on improving unit economics through customer acquisition and cost control.