HDFC faced a hostile banking landscape following the merger in 2022, HDFC Bank MD & CEO Sashidhar Jagdishan was quoted as saying in a ToI report on August 10.

Jagdishan acknowledged that the banking landscape changed dramatically after the lender decided to merge with parent HDFC in April 2022, but he defended the decision. Speaking at the bank’s annual general meeting, Jagdishan highlighted that the global economic situation had shifted, altering their initial growth projections due to tighter liquidity conditions and shifts in consumer preferences.

Jagdishan noted that the bank's decision to merge had initially factored in growth rates based on a benign liquidity environment. However, this changed after the Reserve Bank of India (RBI) announced a series of repo rate hikes from May 2022, starting with a 40 basis point increase, in response to rising commodity prices following the Ukraine invasion. These rate hikes, totaling 250 basis points, alongside RBI's measures to drain surplus liquidity, increased deposit costs for banks, impacting HDFC Bank significantly as it needed to raise deposits not only for incremental growth but also to cover HDFC's erstwhile assets.

Jagdishan highlighted changes in consumer preferences, noting a shift towards mutual funds, equities, and real estate. Addressing these changes, he reiterated the bank’s commitment to branch expansion. He underscored that branch density in India remains lower compared to developed countries and emphasized the ongoing need to grow branches to boost deposit accumulation.

“It is in the economic interest of the institution, to try and ensure that the deposit growth is much greater than the credit growth, and even if it means for a period of time, we have to slow down credit growth. We can then enjoy the benefits of the cycle moving back upwards at the appropriate time,” said Jagdishan.

He also touched upon the bank’s focus on brick-and-mortar outlets, underscoring their importance for customer engagement. “The branch is a wonderful platform to engage with customers. You will still see bank branches in New York and London."