HDFC Bank, the largest private sector bank, reported strong growth in a key operational parameter, signaling a rebound in Q1FY27. Credit growth hit 12.4% y-o-y to Rs 31.27 lakh crore in the June 2026 quarter, as per provisional data released on Saturday afternoon.
The growth in loans for HDFC Bank in the June 2026 quarter is far stronger than the 6.7% y-o-y growth reported in the June 2025 quarter (view table below). HDFC Bank has not given details of which loan / credit segments have shown strong in the June 2026 quarter. However, in earlier quarters, the bank has shown strong growth in small and mid-market loans, and business banking.
HDFC Bank, like PSU banks like Central Bank of India and Bank of Baroda, who have released provisional numbers for the June 2026 quarter, has helped to overcome investor fears that the Middle East crisis would lead to a slowdown in the domestic economy and the resulting sluggish demand for credit facilities.
The June quarter is typically a slack / sluggish season for credit, with individuals, small and large companies evaluating their financial goals / targets for the new financial year coupled with the holiday season for families in most parts of the country.
Credit growth is an operational parameter of a bank that is keenly tracked, and investors have been keenly following this metric of HDFC Bank.
Apart from strong loan growth in the June 2026 quarter, HDFC Bank’s deposits grew 14.7% y-o-y to Rs 31.7 lakh in the June 2026 quarter. HDFC Bank has also highlighted deposit growth was driven by 17.4% y-o-y growth in time deposits (mainly fixed deposits) to Rs 21.45 lakh crore in the June 2026 quarter.
Deposits form the basis of a bank providing loan credit facilities. HDFC Bank’s credit-to-deposit ratio was nearly 98.6% in the June 2026 quarter.
The above strong growth in loans in the June 2026 quarter comes at a time when HDFC Bank has also taken several steps to improve investor concerns related to its corporate governance. For instance, the two external law firms found no merit in the statements made by Mr Atanu Chakraborty, erstwhile part-time chairman of HDFC Bank, related to his resignation on March 18, 2026 (view below).
Also, the recent appointment of Mr Rajiv Kumar, as new part-time chairman, for a term of 3 years, subject to RBI approval.
As a result, investor sentiment for HDFC Bank stock has shown signs of improving. The stock ended 0.6% higher at Rs 801 on Friday, and it has risen from its 52-week low of Rs 726.75 that was reached on 2 April, 2026.
Merger-related concerns
The merger of HDFC Bank and HDFC on the effective date of 1 July, 2023, had resulted in the merged entity having a credit-to-deposit ratio of nearly 104.4% at the end of the March 2024 quarter. And it resulted in HDFC Bank very cautiously growing its loan book, to the disappointment of shareholders and Dalal Street.
Banks typically maintain a credit-deposit ratio of 75% to 80%.
The then RBI governor, Shaktikanta Das, in a media interaction in January 2024, had highlighted that the central bank does not prescribe any credit-deposit ratio for banks to maintain. He added that the RBI wants to ensure that there is no unnecessary exuberance in lending and that there remains some sort of correlation between credit extended by banks and deposits available with them.
For perspective, government-controlled State Bank of India (SBI), the largest bank in the country, its credit-to-deposit ratio was nearly 76.6% at the end of the March 2024 quarter.
To gain a better understanding of the double-digit loan growth at HDFC Bank, we dug deeper into the June 2026 quarter update, and compared with the loan growth reported in June 2025 quarter and that of June 2024 quarter.
June 2026 loan growth – strong growth in loans despite Middle East crisis
HDFC Bank – Loan growth trend over the years
| Loan growth – % change (y-o-y) | |
| June 2026 quarter | 12.4% |
| June 2025 quarter | 6.7% |
| June 2024 quarter | 52.5% |
HDFC Bank grew its advances by 12.4% y-o-y to Rs 31.27 lakh crore in the June 2026 quarter. Its deposits grew by 14.7% to Rs 31.7 lakh crore at the end of the June 2026 quarter. This would imply a credit-to-deposit ratio of nearly 98.6% in the June 2026 quarter.
Now, before we move to compare earlier year numbers, here are some data points showing where HDFC Bank stood “pre-merger” with HDFC.
In FY23, the last full year before the merger, HDFC Bank had grown its advances by nearly 17% y-o-y to Rs 16 lakh crore, and its deposits grew by 20.8% y-o-y to Rs 18.83 lakh crore. It had a credit-to-deposit ratio of nearly 85% at the end of FY23. On a point-to-point basis one can clearly see a higher than desired credit-to-deposit ratio. Not the best position to be in.
The post-merger sluggish loan growth trend
Now let’s compare the earlier June quarter performance of HDFC Bank, since its merger took effect.
In the June 2025 quarter, HDFC Bank grew its advances by 6.7% y-o-y to Rs 26.28 lakh crore, and in its earnings presentation the bank had highlighted strong growth in small and mid-market along with business banking.
Its deposits grew by 16.2% y-o-y to Rs 27.64 lakh crore in the June 2025 quarter, and the bank has highlighted a 20.6% y-o-y growth in its time deposits (mainly fixed deposits) for the quarter under review.
HDFC Bank’s credit-to-deposit ratio was nearly 95.1% in the June 2025 quarter.
Going back further, in the June 2024 quarter, the merged HDFC Bank’s advances were Rs 24.63 lakh crore, a growth of 52.5% y-o-y.
Its deposits were Rs 23.79 lakh crore in the June 2024 quarter, a growth of 24.4% y-o-y.
The numbers for June 2024 quarter are impacted by the merger that took effect on 1 July, 2023, and hence, the growth rates appear to be very high. But it can clearly be seen how the credit-to-deposit ratio jumped to nearly 103.5%.
HDFC Bank’s ROA is amongst the best in the industry
HDFC Bank and Kotak Mahindra Bank have one of the highest Return on Assets (RoA) in the banking industry, over the past several quarters.
HDFC Bank’s return on average assets (not annualised) was 0.48 % in the March 2026 quarter, and 1.94% for FY26. HDFC Bank will declare its June 2026 quarter results on July 18, 2026.
In comparison, Kotak Mahindra clocked RoA (not annualised) at 0.53% in Q4FY26 and 1.97% for FY26. Smaller rival, Axis Bank ‘s return on Assets (annualised) was 1.58% in the March 2026 quarter and 1.45% for FY26.
Investors on Dalal Street
HDFC Bank – reasonable valuations
| Bank | Price-to-(standalone) book value |
| HDFC Bank | 2.2 times |
| Kotak Mahindra Bank | 2.9 times |
On the preferred valuation matrix, price to (standalone) book value, the stock trades at nearly 2.2 times, according to Screener.in. HDFC Bank’s core banking operations are reflected in its standalone quarterly results.
Over the past 5 years, the HDFC Bank stock has traded at a price to (standalone) book value between 2 times and 4.3 times
Kotak Mahindra Bank trades at on a price-to-(standalone)-book value of 2.9 times. Over the past 5 years, Kotak Mahindra Bank has traded at a price-to- (standalone) book value between 2.6 times and 6.9 times.
HDFC Bank is currently trading at lower end of its price-to-(standalone) book value and at much lower valuations to Kotak Mahindra Bank.
Investors could add HDFC Bank to their watch list of stocks for the current calendar year and watch if the sustained turnaround in loan growth is an indication that the bank is finally emerging from the post-merger slowdown.
Disclaimer:
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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