So I’ll try to answer this riddle.
The average Credit to Deposit Ratio in India is around 80% (RBI has asked the banks to bring it below 90%)
RBI has been stressing on decreasing the CD ratio for healthier balance sheets.
The credit to deposit ratio is a crucial metric that provides insights into the relationship between a bank’s loans (credit) and its deposits. In simple terms, it measures how much of a bank’s deposits are being lent out as loan]
HDFC bank’s CD ratio is above 100%(post merger) this means that if the bank needs to bring down it’s CD ratio it can do
- Reduce the no. of loans it’s dispersing.
- Increase the deposit in the bank.
Both of them will be deadly for the NIMs and growth. Also, with already such interest environment, and so much competition it’s very difficult for it to get more deposits and by reducing loan dispersal growth will take a hit.
The same for ICICI bank is around 80-85%
This means that ICICI can grow its loan book much easily compared to HDFC bank.
The shear size of HDFC bank and the loan books of HDFC limited are few of the causes for the pain.
Thus is what I’ve understood till now.
In fact until RBI is stringent on the finance sector, pain might continue for longer even if the bank keeps performing what it’s been doing since long.
Feel free to add any feedbacks.
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