HDFC Bank expects NIM recovery in 2-3 years as HDFC merger impact eases

HDFC Bank expects its net interest margin (NIM) to improve over the next two to three years as the impact of its merger with HDFC moderates, HDFC Bank Part-time Chairman Rajiv Kumar said at the bank’s annual general meeting (AGM) on Wednesday.

The comments come weeks after the country’s largest private lender reported a standalone net profit of ₹19,059.72 crore for the April-June quarter (Q1 FY27), up 4.98% year-on-year. Net interest income (NII) rose 6.7% to ₹33,535.95 crore, while NIM stood at 3.26% on total assets and 3.40% based on interest-earning assets.

Kumar said the merger had led to structural changes in the bank’s balance sheet, particularly affecting its current account and savings account (CASA) ratio and net interest margins.

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“The merger has resulted in a structural change 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 over the next two to three years,” he said.

The bank reported a 10.8% year-on-year increase in average deposits to ₹30,386 billion during the June quarter, while average advances rose 13.3% to ₹30,115 billion.

Retail, MSME and technology remain growth focus

Kumar said more than 95% of customers taking a home loan from HDFC Bank for the first time now also open a savings account with the lender, reflecting the cross-selling opportunities created by the merger.

He added that HDFC Bank has a market share of more than 20% in MSME lending, ranks first in 15 states and is among the top three lenders in 25 states. The bank operates across 721 districts and has added more than 4,000 branches over the past five years, with around half located in semi-urban and rural areas.

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Kumar also highlighted investments in technology, including upgrades to the bank’s core technology stack, expansion of in-house engineering teams and the deployment of generative artificial intelligence through its in-house platform, NEEV.

Opening the AGM, Kumar sought to reassure shareholders following his appointment as CEO, saying he would focus on preserving the bank’s governance standards and stakeholder trust.

On asset quality, HDFC Bank reported gross non-performing assets (GNPAs) of 1.17% as of June 30, 2026, compared with 1.15% at the end of March, while net NPAs stood at 0.41%.