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In the fast-paced world of Indian banking, the recent moves by HDFC Bank have certainly caught everyone’s attention. The numbers speak for themselves: a whopping 480 billion rupees in home loans disbursed from July to September this year. That’s not just a statistic; it’s a sign of change in the financial landscape. What’s more intriguing is that this surge marked a 14% sequential growth and a 10.5% year-over-year increase when compared to HDFC’s previous loan book.
HDFC Bank, traditionally known for acting as a distribution agent for HDFC, has now ventured into the home loan market directly. And they’re making waves. The catalyst behind this transformation? A merger with mortgage heavyweight HDFC Ltd. This partnership catapulted HDFC Bank to new heights, achieving its highest-ever home loan disbursals.
However, it’s not just home loans that have seen an upward trajectory. The bank’s retail loan book has skyrocketed, with an astonishing 85% increase over the previous quarter and a jaw-dropping 111.5% growth over the same period last year. The bank is on the move, and it’s not just limited to home loans.
Switching gears to the corporate world, the non-individual loan book saw a slight decline, falling from 1.09 trillion to 1.03 trillion rupees by the end of June. But don’t let that small dip overshadow the bigger picture. The bank’s total gross advances surged to 23.5 trillion rupees in the second quarter, reflecting a 4.9% increase from the combined advances as of June 30, 2023.
The growth wasn’t limited to just one sector. Commercial and rural banking loans boasted impressive figures, with an astounding 29.5% jump compared to September 30, 2022, and a solid 9.5% increase over June 30, 2023. Corporate and other wholesale loans also made significant strides, growing by approximately 8.0% compared to September 30, 2022, and a commendable 6.0% over June 30, 2023.
The bank’s deposits soared by a whopping 1.1 trillion rupees, reaching a staggering 21.7 billion rupees. It’s a testament to the bank’s prowess and influence in the Indian financial sector. Despite this financial success, a shift has been observed in customer behaviour. Casa deposits, which include current and savings accounts, have seen a decline. Customers, enticed by higher interest rates, have started moving their funds to term deposits. According to CARE Ratings, the share of Casa deposits in commercial banks has fallen from 44.1% in September 2022 to 41.6% in June 2023.
Why the Casa conundrum? Casa deposits are the lifeblood of daily transactions for businesses, households, and individuals. They’re known for their low-interest rates, making them an affordable source of funds for banks. The more Casa deposits a bank holds, the lower its cost of acquiring funds, allowing it to maintain healthy profit margins and offer competitive lending rates.
So, why are customers making this shift? Primarily, it’s the allure of higher interest rates offered by term deposits, some banks even reaching a generous 8% annually on savings accounts. Banks are now in a dilemma, as they don’t want to lock in their liabilities at high fixed deposit rates.
As the financial year progresses, the Casa conundrum remains unresolved. Public-sector banks hold an edge with their extensive branch networks in semi-urban and rural areas, attracting Casa deposits and refraining from frequent savings deposit rate adjustments. Meanwhile, private banks and small finance banks actively compete by offering higher interest rates on savings accounts, making it challenging for the industry giants.
In this ever-evolving financial landscape, the battle for Casa deposits and the quest for financial stability continue. Banks must navigate these shifting tides, striving to strike a balance between profitability and customer satisfaction. As customers weigh their options, the Indian banking sector faces a dynamic challenge, one that will continue to shape the industry’s future.
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