HDFC Bank has held back from lending up to Rs. 1 lakh crore recently due to intense competition from public sector banks, which are offering loans at lower interest rates.

However, HDFC Bank believes that it can double its balance sheet with improved lending in four years.

“The recent liquidity build-up (via HDFC Ltd balance sheet) places the bank well to pursue growth in FY24 without worrying much on the funding side. Good momentum in the mortgage business and improved cross-selling will boost growth in retail assets, while stable traction in MSME will help it maintain overall broad-based growth,” said brokerage firm Motilal Oswal in a note.

The brokerage firm expects loan growth for the merged entity to sustain at 12% over the remaining FY24. It expects loan CAGR to recover to 17% over FY24-FY26.

The private sector lender also has plans to open 1400-1500 branches in FY 2024, taking the total number of branches to 13,000-14,000. This is in addition to the 500 branches that the former HDFC had.

Moreover, the bank expects recoveries to be robust over the coming years. The gross NPA of HDFC’s non-individual portfolio was 6.7% as of July 2023. The bank has also made higher general and contingent provisions of Rs. 3,900 crore and specific NPA provisions of Rs. 3,800 crore to maintain the strength of the merged balance sheet due to differences from HDFC’s provisioning.

Moreover, the bank said that it may not be easy for them to achieve the priority lending target. However, the bank is confident that it can meet its overall PSL requirements and deliver 2% return on assets (RoA) in the medium term.