HDFC Bank merger drag eases as capital stays strong

HDFC Bank Ltd ( HDFCBANK ) continues to work through the after-effects of its HDFC Ltd merger. The key number is its 18.87% capital adequacy ratio, well above the regulatory requirement of 11.9%. The investment debate around HDFC Bank is no longer about asset quality. The bank reported a gross NPA of 1.11% and net NPA of 0.37%, extending its long track record of credit discipline. It also operates at massive scale with around 120 million customers, 9,706 branches, and a wide digital banking presence. What matters now is growth. The merger with HDFC Ltd significantly expanded the loan book, but deposits did not rise at the same pace. This created a funding mismatch that pressured margins and slowed earnings momentum. That helps explain why the stock has lagged the broader market despite remaining one of India's strongest private-sector banks. The headline risk is that investors became accustomed to years of high growth. As the bank gets larger, sustaining those growth rates becomes harder. At the same time, competition from banks and NBFCs is intensifying, especially in lending. The more important point often missed is that management appears focused on fixing the right problem. Improving deposit quality, increasing branch productivity, and deepening customer engagement are all aimed at restoring balance between funding and growth. If that improves steadily, the market's attention could shift from merger-related concerns back to the bank's strong franchise and balance sheet. What to watch next: deposit mobilisation, net interest margin trends, loan growth relative to deposit growth, and the first few quarters under the new leadership team. View: HDFC Bank's investment case increasingly depends on restoring growth after merger integration. Asset quality and capital remain strengths, but investors should watch whether deposit growth improves fast enough to support earnings acceleration.