HDFC Bank's part-time chairman Rajiv Kumar on Wednesday assured shareholders that the structural pressure on the bank's current account savings account (CASA) ratio and net interest margins (NIM) — stemming from its merger with mortgage lender HDFC Limited — is temporary, and that both metrics are on course to recover over the coming quarters. Kumar made the remarks at the bank's 32nd Annual General Meeting (AGM) in Mumbai, his first as part-time chairman.

Key Assurances on Governance

Kumar opened his address with a strong reaffirmation of the bank's governance framework, signalling that internal controls and ethical standards remain intact. 'With a firm commitment to safeguard the trust that our shareholders, customers, and stakeholders have placed in us, the bank's ethos and internal control systems are strong. I assure you that this will be further strengthened and empowered,' he said.

His remarks carry particular weight given the context. They come months after the unexpected resignation of former part-time chairman Atanu Chakraborty in March, who cited differences over ethics and values that he said were not aligned with his personal beliefs. A subsequent independent legal review conducted by the bank found no evidence to support the ethical and governance concerns he had raised.

Merger's Impact on Balance Sheet

Kumar acknowledged that the integration of HDFC Limited into the bank had altered the composition of its balance sheet, placing downward pressure on both CASA ratios and NIMs — two metrics closely watched by analysts as indicators of a bank's funding cost efficiency and profitability.

'The merger has resulted in structural changes in our balance sheet, primarily in the CASA ratio and our NIMs. As we continue our progress on incremental deposit market share, and with stepped-up focus on the consumption side of the economy, we are confident of improving these metrics in a few quarters,' Kumar said.

The bank's strategy to address this involves strengthening its deposit franchise and expanding consumption-led lending — a deliberate pivot toward retail credit growth that analysts have been tracking since the merger closed.

Board Appointments to Be Merit-Driven

Kumar also signalled a clear direction on future board composition, stating that new directors would be inducted strictly on the basis of merit, integrity, and professional competence. 'It would be difficult to find that kind of excellence, but we will induct new directors who are best in class, strictly with the sole consideration of merit, integrity, and professional excellence,' he said.

Notably, Kumar did not address the heightened shareholder scrutiny around the reappointment of Managing Director and Chief Executive Officer Sashidhar Jagdishan for a third term — a matter that has drawn attention from both investors and regulators in recent months.

What to Watch

The bank's ability to rebuild CASA ratios and restore NIM levels will be a key performance indicator in the quarters ahead. Investors and analysts will be watching deposit growth trends and the pace of retail loan expansion as early signals of whether the post-merger normalisation is on track. The next set of quarterly results will be the first concrete test of Kumar's assurances.