New CEOs Confront Growth Tests at HDFC, Kotak
HDFC Bank and Kotak Mahindra Bank now operate under new leadership, each tackling distinct but equally demanding growth pressures. Anup Bagchi assumes the helm at HDFC Bank with the immediate task of reversing a decline in low-cost deposits, while Anup Kumar Saha takes charge at Kotak Mahindra Bank, where a strong capital position must now translate into improved returns through more effective balance sheet expansion. Both institutions face the core challenge of scaling operations without compromising margins, funding quality, or profitability—a test of operational skill at a decisive moment.
HDFC Bank’s Deposit Imbalance Threatens Margins
The most urgent issue for HDFC Bank lies in its deposit composition. While gross advances increased by 15.4% year-over-year in the first quarter of fiscal 2027, reaching ₹30.60 lakh crore, deposits grew by 14.7% to ₹31.70 lakh crore. The concern centers on current and savings account (CASA) deposits, which grew by just 9.4% and now represent only 32.3% of total deposits. In contrast, term deposits, higher-cost funding, expanded by 17.4% to ₹21.46 lakh crore, widening the imbalance. This shift has squeezed HDFC’s net interest margin (NIM) to 3.26% in Q1FY27, down from 3.38% in the prior quarter, as funding costs remained stable while asset yields declined.
Bagchi’s extensive background, 34 years at ICICI Bank, including senior roles in retail banking, suggests experience in deposit mobilization. However, HDFC’s difficulties extend beyond volume to deposit quality. Retail advances grew by 7.2% in the quarter, but small and mid-market enterprise loans surged by 18.7%, indicating a heavier reliance on riskier segments. The risk for Bagchi is that aggressive loan expansion without a corresponding shift toward cheaper retail deposits could further narrow margins or force the bank to pay higher funding costs.
Kotak Mahindra’s Capital Strength Meets Growth Challenge
Kotak Mahindra Bank’s situation presents a different set of constraints. Deposits rose by 12% year-over-year to ₹5.72 lakh crore, while net advances climbed by 15% to ₹5.12 lakh crore. Its CASA ratio of 40.3% is stronger than HDFC’s, but annualized return on equity (ROE) stood at 11.98% in Q1FY27. While Kotak’s core equity tier 1 (CET1) ratio remains robust at 22.6%, the bank’s conservative approach has left excess capital underutilized. The challenge for Saha is deploying this capital without undermining the bank’s risk-averse culture; gross non-performing assets (NPAs) are low at 1.18%, and net NPAs stand at 0.27%, reflecting disciplined lending practices.
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Macquarie Capital’s Suresh Ganapathy has identified the core issue: Kotak must accelerate balance sheet growth to improve ROE. “Kotak’s ROE is the lowest amongst its large peers, and the only way to improve that is to consume more capital and drive up leverage through faster balance sheet growth,” he said, as per a report by Mint. The task is to achieve that growth without compromising the bank’s conservative approach to risk. While the bank’s NIM of 4.53% remains stable, any mismatch between loan and deposit growth, or reliance on costlier funding, could reduce margins.
Strategic Outlook for India’s Top Private Lenders
The new CEOs inherit banks that are fundamentally strong but operationally limited. HDFC’s loan growth remains robust, yet its deposit base remains exposed to cost pressures. Kotak’s capital reserves are ample, but returns lag behind peers. Both will need to demonstrate that India’s leading private lenders can expand without repeating past mistakes, where rapid growth led to margin erosion or weakened asset quality. The next 12 to 18 months will determine whether their strategies can achieve sustainable growth without compromising the foundations of their institutions.
Capital Deployment and Share Reaction to New CEOs
Kotak Mahindra Bank named Anup Kumar Saha as its managing director and chief executive, prompting a 3.5% rise in the bank’s shares. The institution holds ample capital, but the focus now is on channeling that capital into loans and other assets that can lift returns.
