HDFC Bank Shares Plunge By Over 4% Amid Concerns Over Credit-Deposit Ratio

HDFC Bank, the largest bank in the country in terms of capitalisation, and one of the most consequential private banks in the Indian paradigm, appears to have gotten off to a bad start on the last day of the trading week on Friday, July 7.

HDFC Bank Shares Drop

The bank's shares were one of the shares on watch after it declared that gross advance had jumped to 52.6 per cent. In the early hours of the trading session, the share dropped by over 4 per cent.

According to the bank statement published in an exchange filing, the lender's gross advances stood at Rs 24.87 lakh crore in the recently concluded quarter that ended June 2024.

This is much higher—52.6 per cent, to be precise—than the gross advance of Rs 16.3 lakh crore in the year-ago period.

Advances are a lot like loans, except that they are credit-banking instruments offered by banks to meet short-term requirements.

Interestingly, when it came to the Credit-to-Deposit ratio, it improved its numbers from 112 per cent last year. But the CD ratio was still high, at 105 per cent.

High Credit-To-Deposit Ratio

The credit-to-deposit ratio, in simple terms, is a metric to gauge the amount of deposits in the bank that are being deployed to give out loans. The ideal credit-to-deposit ratio for banks around is said to be in the range of 80-90 per cent.

The Mumbai-based bank's shares have performed consistently poorly since the beginning of the day on Friday, the stock price dropped by a significant 4.23 per cent or Rs 73.00, taking the overall decline in value to Rs 1,654.15.

In addition, the bank is also aligning for a potential weightage change in MSCI Standard index.

The bank has not had the best few days in the equity markets. This, as, the share value dropped by 2.03 per cent or Rs 34.30.

Some of HDFC Bank's counterparts in the private aisle of the banking business, including ICICI and IndusInd, are also trading in red. ICICI Bank's share dropped by 0.12 per cent, slipping to Rs 1,231.50. Meanwhile, IndusInd Bank also declined by 0.51 per cent, decreasing to Rs 1,435.50  per share.