管理層發言
Ladies and gentlemen, good day, and welcome to HDFC Bank Limited Q3 FY '26 Earnings Conference Call. Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to Mr. Vaidyanathan.
Thank you, Nirav. Good evening, and welcome to all participants. I apologize for starting 15 minutes late; we had another meeting that ran over. We'll do our best to answer as many questions as we can and extend the discussion if necessary. Now, let's move on to the opening remarks from our CEO and Managing Director. After that, we will hear comments from our Deputy Managing Director, Kaizad, and then we'll go straight to the Q&A session. Sashi, please go ahead.
Good evening, everyone. Thank you for joining us on this Saturday evening. I appreciate your presence despite the late hour. We have announced our results, and you may have already seen the financial figures. Overall, we are pleased with the outcome, which aligns with our expectations. The growth in credit has been very encouraging, and we aimed for a balanced approach across our customer segments. The easing of interest rates and favorable credit conditions have supported this growth. The release of the Cash Reserve Ratio allowed us to deploy credit slightly sooner than anticipated. In terms of funding, we have continued to uphold rate discipline through deposits, which has been crucial. Our core retail customer segments have shown strength, particularly in current and savings accounts, and focusing on specific market segments has yielded positive results. While we may not have met all our ambitious goals, we are confident that our ongoing focus on our strengths will lead to the desired outcomes.
As for growth, our cost of funds has decreased, creating favorable conditions. The growth in Current Account-Savings Account has also been positive, and our costs have remained manageable due to increased productivity. Credit, a key strength for us, continues to provide stable returns as we move towards the next growth phase. Looking ahead, both the regulator and government remain committed to supporting credit and economic growth while effectively managing external factors. During the quarter, liquidity was affected by various challenges, but there has been increased activity in open market operations and foreign exchange swaps to address these issues. India continues to demonstrate stable political conditions and a consistent policy environment, positioning itself as one of the fastest-growing major economies globally. We believe that subdued inflation management will enable us to exceed loan growth expectations in FY '27, as we have communicated over the last 18 months.
With favorable liquidity and manageable credit costs, we have ample opportunity for growth. We expect overall liquidity in the country to stabilize following trade agreements. The groundwork is being laid to build deposits to support loan growth. We are growing our customer base and enhancing customer engagement, focusing on targeted mobilization efforts. Our pricing strategy is aligning with this segmented approach, which we expect to see reflected in upcoming quarters. We have made significant progress in reducing our CD ratio since the merger. While this indicator is not a regulatory focus, we believe our commitment to lowering the CD ratio is essential for sustainable profitability. The pace at which we can move the CD ratio will depend on our ability to provide funding at rational rates. However, we remain confident that by March '26 and '27, we will meet most of the goals we have set.
Under the current circumstances, we do not foresee constraints regarding the CD ratio and reaffirm that we are on track for a downward trajectory. I want to reiterate that our top-line growth targets align with the system for this financial year and will surpass the system in the next financial year. In conclusion, I express my deep appreciation for our customers for their partnership and my gratitude to our 200,000 employees, who are fundamental to our success. We are optimistic about the path ahead. Thank you very much, and our team, including Kaizad, Srini, and others, are here to address any questions you may have. Thank you.
分析師問答
First question is from the line of Mahrukh Adajania, an analyst.
Sir, my first question is on the LDR. You did allude to it. But when do you think now you would reach an LDR, say, close to 90% or below 90%, like any time frame? So that's my first question. And my second question really is on agri compliance. So two large banks have been asked by RBI to make provisions on a certain agri portfolio because of noncompliance issues, provisions of INR 12 billion to INR 13 billion. So as we stand today in terms of your agri portfolio, do you think there is full compliance or there could be some issues somewhere given that it's a large portfolio, it's spread out across the country? And do you think you would be liable to such provisions in the future?
Thank you, Mahrukh. I'll address that. The first point you mentioned is about the LDR in terms of timing. Sashi hinted that we are focused on gradually reducing it, and we remain committed to that. However, on a quarterly basis, the situation can differ slightly due to seasonality and various opportunities. Recently, additional opportunities arose due to the easing cycle, the focus on credit growth in the industry, and the CRR release, which allowed us ample room to progress. So, we expect that over the next one to two years, we will continue to decrease to levels we previously achieved, say the 90s or low 90s, and we are confident about this, as we have the necessary foundations in place. Regarding your question about agriculture compliance, our regulatory inspection has been completed, and we have accounted for about INR 5 billion in accordance with regulatory requirements, which has been integrated into our overall results, and there’s nothing special to report. As we move forward, we will continue operating in a regulatory-compliant manner. Any one-time events have already been incorporated, and we will need to assess our agri finance model to align with regulatory standards. This involves determining what qualifies as agricultural finance and what exceeds the farmer's requirements. We will evaluate this carefully to ensure proper calibration moving ahead.
But did the INR 5 billion come this quarter only then?
Yes, it is already subsumed in December.
In December. Okay. And what would be the size of the portfolio? Any such indication you could give?
Our agri portfolio is published. You'll be able to see the...
No, the size of the portfolio on which the provision was taken.
No, that's not something that is related to this at all because it depends on the loan item and the scale of finance on each one. But at an aggregate level, that’s the kind of level.
Next question is from the line of Kunal Shah from Citigroup.
Yes. So again, getting on to the question on LDR and deposit growth in particular. So if we want to get the LDRs down and still want to grow loans above the industry average comfortably, then we need to see an acceleration in the deposit growth. And you said like pillars which are required are very much in place. So any reason maybe for a slightly slower deposit growth this quarter? Otherwise, we will need like almost 500, 600 basis points higher than the industry average deposit growth now to get the LDRs down. And any rundown in the bulk deposits, which have been there in this quarter? And if you can quantify that?
Let me address this, and perhaps Srini and Kaizad can add more if needed. Kunal, as you may remember, we provided a broad range. First, there is no regulatory benchmark or requirement to meet a loan deposit ratio. There was some guidance during times of negative outlook or tight liquidity when inflation and rates were rising, leading to concerns about credit quality. The regulator suggested that we should aim to lower the loan deposit ratio or ensure some stability in it at that time. However, there's no compulsion to meet a specific number. In our interest, we presented a glide path, aiming to reach a certain number in FY '25, which we achieved. We mentioned we would target a range of 90% to 96% in FY '26, and we are confident about that. By FY '27, with the anticipated growth rate, we anticipate landing between 85% and 90%. We firmly believe this is achievable, although it won't be easy.
We are aware of the strategies needed. While there were tactical measures we could have taken in the third quarter, we decided against them, which is fine; we have learned from that. We know what needs to be done to meet the glide paths we've committed to in the medium to long term. Regarding the required deposit growth, the pace at which we are increasing deposits aligns with our top-line growth, which is around 11% this year and is likely to be slightly faster in the fourth quarter, similar to past years. This should lead us to the range we've committed. We are confident that, barring unforeseen events, we’ll meet our targets. As Srini mentioned, it's essential to look at annual trends or medium to long-term trends rather than quarterly fluctuations. The upward momentum has begun. We had to hold back in FY '25 for valid reasons, but now we are opening up, and you should see consistency in the trajectory we have set for ourselves.
Sure. And anything on bulk deposits rundown, quantification, if possible?
More than quantification. I mean, Kunal, that's part of the business. There are certain segments that we patronize. I think Sashi mentioned about where rate discipline has been the key. And to some extent, we participate for relationships and certain extent, we don't need it, we don't go there. But on the whole, if you look at the retail or non-retail, retail, there are individuals in retail, which have been phenomenally growing and growing. There are certain non-individuals in retail, which is branch related. It could be institutions, trusts and HUFs and whatnot. Examples of some non-individual but branch related, where we have had some lower levels of growth. And there are certain other customer segments which we have seen, particularly capital market segments where it has been low, where we have not paid rates as much as what the market has demanded or what the competition has offered. And that is what you see that is reflected in our cost of funds. If you look at our cost of funds is down by about 10 basis points, 11 basis points or so in the quarter. So we're trying to manage it growth with the profitability, and that is what you are seeing, right? So segment to segment, time to time, it changes, but at least you've got a color of how we operated in the recent time period.
You're right, Kunal. To add to what Srini mentioned, the positive news is that retail has grown consistently, and I'm very pleased with the details we've observed. In terms of non-retail, we did not provide the market rates that were available. We felt that was acceptable because we understood that the growth we aimed for was sufficient.
Got it. And one last question on labor code. So the impact of almost INR 8-odd billion, looking at our employee cost and then comparing maybe the labor code impact vis-a-vis the employee cost for others. For us, it seems to be relatively on the higher side, more than 10% of the employee cost, not so much for the other banks. So is this more of an estimation which has been done? And what would be the recurring impact which would be there on the cost as such?
Good point. Thank you for bringing that up. First, it is an estimate based on the information available to us. This estimate is generated through an actuarial process. There is a standard method for this, involving an actuarial valuation to assess how things are proceeding. It's influenced by certain assumptions. Secondly, the definition of variables such as what constitutes wages, including what falls under wage inclusion and exclusion, is still pending clarification through rule-making. There are assumptions that play a role in these variables, which are not based on finalized rules but on projected considerations. Additionally, individual organizations can vary significantly, particularly based on the duration of their staff's tenure, which affects both historical and future aspects. Many factors like these influence the estimates. At this point, I encourage you to view it as a higher estimate grounded on the best available information and a scientific actuarial approach.
As rule-making develops and more information comes to light, the estimates will be updated. However, I can't provide a forward-looking impact or what it might mean in the long term at this stage since we need more factors established before making those determinations. Therefore, we cannot specify what an individual amount could be for retirement or any provident fund at this point. This is a high-level estimate based on the best information we have.
Next question is from the line of Chintan from Autonomous.
May I get into the LDR again, please? So Sashi, please, did I hear you correctly when you said 85% to 90% by FY '27? That seems to be aggressive to me. If I look at consensus numbers, it's expecting 13% loan growth and 93% LDR. If you are going to achieve kind of the 90% in the next fiscal year, that suggests a very strong deposit growth number. And I know you've kind of said that you want to prioritize growth now. So it's not piling up. So if you could help us...
Thanks for your question, Chintan. I've provided a broad range because I want to keep our options open. We've been operating around 87% to 88% at pre-merger levels three years ago. So when I mention 90%, I mean it's roughly in that range, possibly 88% to 91%. The trend indicates it could be 96% for FY '26 or even 95%, which is acceptable for us. I'm using a broad estimate because I'm uncertain about future liquidity conditions. If liquidity improves and there are no significant forex impacts, that would be great. That's why I gave a wide range. Nevertheless, achieving these directional goals is something we aim for without needing any regulatory compliance; it’s about what we need to accomplish ourselves. We believe that by focusing on our core operations, we can reach these targets naturally. While we forecast faster growth than the system, our deposit growth rates often align closely, and sometimes even outpace loan growth. This is how we've projected our performance for FY '26 and '27. So don't interpret our forecasts strictly; we could fall anywhere within that range. Ideally, if we're around 90%, we’d be satisfied, and similarly, reaching approximately 95% for FY '26 would also be satisfactory.
Thank you for that. If you're prioritizing EPS growth over a slight slowdown in ROE improvement, that's acceptable, especially if there are market opportunities available. I wanted to confirm this flexibility that you have pointed out. My second question is about asset quality. Given your position as the second largest bank in India, could you provide insights on any increase in growth momentum or issues related to asset quality, particularly in light of the U.S. tariffs or in the MSME sector? I'm interested in understanding if growth is improving and if there are broader asset quality concerns, even if they are not directly related to your own portfolio.
If I understand your question correctly, you're asking about the trend in asset quality and its current status. In the banking sector, we are experiencing a strong phase, with very healthy balance sheets in terms of asset quality. Our gross non-performing assets (NPAs) have the lowest increase, and net NPAs are at decade lows. This trend is also reflected in our financials, as we've observed minimal growth in gross NPAs, and no specific portfolios are showing signs of stress. The economic environment, characterized by GDP growth, consumption increases, and wage hikes on one side, along with lower interest rates and improved affordability on the other, along with fiscal benefits, all contribute to our strong asset quality. As we see it, there are no significant concerns in any particular segment. Srini, would you like to add anything?
Perfectly good. There will be seasonality in agri specifically...
That is separate...
Outside of that, every segment, including the agri segment period-to-period, if you see, is lower, both from a leading delinquency and into the slippages, which are far lower. And then from there, going into loss given default is also lower. You're seeing that the recoveries wherever we are there, that is also on an absolute level, good level. Chintan, I hope that gives you a perspective on both sides.
Yes. And just on growth momentum, are you seeing things improve generally in the economy?
In the economy, the growth momentum is evident when looking at recent indicators. The crop cycle has significantly improved, with better sowing compared to last year and healthy water reservoir levels contributing to this progress. The manufacturing PMI remains in the expansionary zone, supported by various incoming programs. The services sector is thriving due to strong consumption demand. Recent data shows card spending has increased by 15%, with a sequential rise of 3.4%. Within card spending, discretionary categories have seen a 21% year-on-year increase, while nondiscretionary spending, which represents everyday activities, is up by 13%. This suggests that as discretionary spending rises, consumers are willing to indulge. Conversely, we observe that revolver rates are not increasing, indicating that people are spending to pay down debt, and some segments of society are contributing to this spending. Overall, sectors like autos and tractors have performed exceptionally well, although the demand for two-wheelers has been somewhat below expectations. This positive performance is reflected in the aggregate GDP output as well.
Next question is from the line of Nitin Aggarwal from Motilal Oswal.
I have a question regarding branch productivity and deposits now that we are optimistic about the pickup in deposits, targeting close to a 90% figure. Looking back at the experiences we've had with branch performance and deposit accumulation, is that trend sustaining in recent years? The overall deposit growth seems to be stagnant at the system level, which presents a key constraint across banks with their loan-to-deposit ratios. Additionally, our own branches have seen a decline from previously high numbers, and we continue to open more branches each year. How do we see this evolving?
I will start by discussing the branches. It's important to analyze the long-term trend instead of focusing solely on the last year's data. If we look back over five years, we opened around 250 branches in 2020, 350 in 2021, 750 in 2022, 1,500 in 2023, 900 in 2024, and 700 in 2025. This trend shows that while we were able to accelerate our expansion, we also maintained our overall returns during this period, which ranged from 1.9 to 2. Our strategy doesn’t necessarily require us to keep opening branches at those accelerated rates; we can take a more measured approach while still expanding. Currently, our branch network constitutes just over 6% of the country's total branches, with our branches numbering over 9,600, but we command more than 11% of the market share in deposits. This indicates significant room for further growth and an opportunity to capture more market share. Regarding branch productivity, our per branch productivity is now approximately INR 305 crores, compared to INR 237 crores per branch from 2019 to 2023.
This improvement reflects the contributions of our recent branch additions and shows aggregate growth. On a micro level, the breakeven period for branches is around two years, with those in metro and urban areas typically breaking even in about 22 months, while branches in semi-urban and rural areas take approximately 27 months. Our new branches align with our legacy models, confirming that they adhere to traditional expectations. Historically, we've observed that a branch's productivity scales significantly as they mature; between the 5th and 10th year, productivity can increase approximately threefold, and by the time they reach 10 to 15 years, this can grow tenfold. Currently, we have about 1,232 branches in the 5 to 10-year range that have realized this threefold increase in productivity. Additionally, we have around 1,300 branches in the 3 to 5-year category, indicating that we are transitioning to a phase where the number of branches entering the 5-plus year category exceeds those leaving the 5 to 10-year category.
Furthermore, we have 2,499 branches in the 10 to 15-year age bracket, which will soon start to evolve into the next growth stage. Nearly 43% of our branches are less than five years old, highlighting a critical cohort that needs to progress through their growth phase. Overall, we feel well-positioned with positive expectations due to these dynamics. Another data point is that these new branches contribute slightly more than 20% of the overall incremental deposits, which is very important as they continue to add value as we progress. That's something I wanted to emphasize.
Okay. So...
Nitin, we benchmark our efforts by district based on our presence in those areas, which informs our marketing and product strategies as well as our work with distribution channels. I want to highlight two important points. Firstly, acquiring new accounts is crucial. We currently have around 100 million customers, and last quarter we added approximately 1.5 million new liability relationships. This new account value is essential for our growth. However, the increase in balances from existing customers has been slower recently because some have chosen to engage with other financial institutions. To counter this, we focus on expanding our presence and attracting more customers with a diverse range of asset products. In the past two years, our retail asset products have not grown as quickly, but we are now working to accelerate that growth. For every asset product, such as cards, we aim to increase customer usage.
In previous quarters, we shared that card customers generally have over 5.5 times the deposit balances compared to other customers. Therefore, we seek to have more of our customers using cards. Regarding mortgages, we have achieved a 99% penetration rate, indicating our focus on establishing strong customer relationships rather than just selling mortgage products. When we offer a mortgage, it typically results in customers opening savings accounts with an average initiation amount of about INR 35,000. We observe significant growth in those accounts over 12 to 18 months. Historically, customers in this category tend to hold five times more in deposits than those without a mortgage. This shows that building liabilities comes from not just engagement but also from offering a range of products.
Next question is from the line of Suresh Ganapathy from Macquarie Capital.
Yes. So first question is on LCR. What would be this quarter? And how it would move post the April 2026 guideline, whether it will move up, move down?
LCR, we reported 116% in this quarter.
And post the new guidelines?
No. The new guidelines, we don't expect any material change that can impact us.
Okay. And just a question on margins itself. It's been almost 9 quarters since the merger, your margins have not gone anywhere. In fact, it is even lower than what you had reported at 3.4%. I know there are several moving parts. Are you really confident that you can get this up in the next 2, 3 years?
Suresh, if you think about the margin, the most important lever on the margin is the cost of funds, which at various points we have mentioned. And within the cost of funds, there are a few. One is the time deposit repricing, which has a lag effect. We have changed time deposit rates in line with the policy rate change, but not fully, but maybe 2/3 way, we have changed 125 basis points is what the policy has changed. We have done about 2/3 into that. We need to see what more. And again, that what's competitively priced, right? So we are not at a disadvantage anywhere there. And that takes almost 5 quarters to flow in. Part of that this quarter, you have seen 10, 11 basis points change in cost of funds. That is the lag effect of that flowing through, then that continues. So that's one element. And the second element is the borrowing. Quarter-to-quarter has remained static at about 13%. But again, more than a quarter, if you look at the year, we were at about 7%.
Broadly, the industry is at about 6%, 7%. So there is an opportunity space to beat that to keep coming down. That is another important lever that provides this cost of funds change. And the third one is the CASA, which again is a customer on the other side more than we creating any action where we need to work through to bring selling within the new customers and better engagement, more products, more retail products. That's the kind of process we need to take through to get to that industry average and beat that industry average over time. Yes, there is a line of sight, and these are some of those elements we work through.
Next question is from the line of Prakhar Sharma from Jefferies India.
Congratulations on the results. Just wanted to delve on this deposit growth part. It was an interesting color that you said that the granular retail has grown, but slightly bulkier retail hasn't. Is there any sort of a data point that you can share in terms of the growth or the mix in the two? And one alternative is, can we use the LCR deposit number and the growth there as a reference point to just get some comfort on what's the range of growth there because 4Q onwards, it gets aggressive on pricing. So if you can share some color, that will be right.
The second part of your question is something we will have to observe. Regarding the growth rate in the categories you mentioned, the institutional deposits were around mid-single digits. That's what we have indicated. Within the retail branch, the non-individual deposits saw more modest growth, likely just above the mid-single digits. In contrast, individual deposits within the branches experienced solid double-digit growth.
Sorry, the individual at the branch was at?
No, I didn't give you a number. I said it's a good double digit, and everything else was in single digit. Yes.
Next question is from the line of Abhishek Murarka from HSBC.
So Srini, going back to the branch addition question, and thanks for giving so much color. But just net-net, are you still looking to grow or add about 5%, 7% branches this year and in FY '27? Or what are your near-term plans? I understand the whole picture you painted about the scale-up of old branches and how that will accelerate deposits. I just want to know your next 1-year plans in terms of branch additions.
Yes. To answer in short, 5% to 7% implies 500 to 700 branches annual. I don't believe that, that kind of branch addition we can do in the near future. We'll evaluate as we go through the annual planning process and come back at some point in time, but it would be of a good order.
Abhishek, to add to what Srini mentioned, if you look at the recent cohort of roughly 4,800 branches developed over the past five years, this segment is currently contributing around 20 percentage points to our incremental liabilities or deposits. As this group begins to mature, we gain confidence to accelerate the next phase of launching new distribution points. While we are not excluding the addition of branches, our focus will be primarily on suburban areas where opportunities exist. We want to ensure that the recent cohort stabilizes and matures to a significant level of contribution before moving forward. Once we reach that point, we believe the process will operate more smoothly, allowing us to shift into the next phase of branch introductions. At that time, it will be necessary to reassess our approach to branch transformation and automation, leading to potential recalibrations in how we expand our distribution network.
Sure. Sashi, that's a great point. Currently, about 50% of branches, which amounts to 4,800, account for around 20% of incremental deposits. Should we think that once this contribution increases to maybe 40% or 50% of incremental deposits, that's when we should consider future expansion? Is that the correct way to approach it?
We will continue to recalibrate our approach, whether it’s 40%, 50%, or 60%. There are many things we are working on. We increased our distribution when we announced our merger because we realized we needed to secure funding not only for the present but also for the future. This will significantly contribute to our incremental deposits in the long run. There are several factors we will consider before we begin the next phase of growth, including the extent of contribution and certain upcoming events. Looking back over the past 30 years, we've experienced phases of distribution adjustments, starting from 2009 to 2014, where we increased distribution, paused briefly, and then resumed growth. This phased recalibration is something we've consistently done throughout our journey, and we will keep it up. The factors we consider will evolve as the world changes rapidly, and as we implement new technologies, we may require different approaches as we progress. I'll pause here, but I believe you understand the overall direction.
Sure. And the second thing is on credit cost. Now if I look at your net slippages, ex of the agri part, but let's say, look at the net slippages in the 9 months or last few quarters, around 30, 35 basis points. Write-offs are holding steady at INR 3,200 crores roughly a quarter. So why is the underlying credit cost around 55 bps and not coming off? I mean, don't you think that should also start coming off at some point if this kind of trends continue.
Abhishek, regarding slippages, if we exclude agricultural slippages, it's 24 basis points for the quarter. The previous quarter was 23 basis points, and the same quarter last year was 26 basis points, so it's around 25 basis points overall. That's the slippage you're observing; it's not the 35 basis points you mentioned. Secondly, when considering credit costs, it's important to factor in recoveries. When we write off certain loans as they move through various delinquency stages, we eventually see recoveries. Net of recoveries, we're around 37 basis points. If you compare it to last quarter and last year, it remains fairly similar, within a range of about 5 basis points. So, it's not just about the 55 basis points; it's also about the net recoveries, which play a significant role. It depends on the speed of write-offs and the subsequent recoveries.
Sure, that's what I was referring to. Net of your recoveries, it should continue to decrease because your slippage performance is improving. The book is growing, and your absolute values are fairly stable. You're seeing very positive asset quality trends, and I was curious why the credit cost is not decreasing.
So in a growing book, if the slippage is consistent, the losses are consistent, and the recoveries are consistent. I'm not sure what you are expecting, maybe something different...
So 50, 55 is more or less BAU is what you're seeing.
No, GNPA?
No, I'm not referring to the credit card. I'll discuss this matter separately. I may not be expressing myself clearly. That's fine. Lastly, I have a question regarding cards. Generally, card receivables remain quite stable. According to the RBI data, your spending market share is performing well, and your market share is also improving. So, why isn't that reflected in the receivables? Is it due to transactors decreasing, or is there another reason?
No, actually, great question, Abhishek. If you really look at it, the segment we are focusing on is more the middle and upper middle segment. Therefore, our portfolio includes slightly higher-end cards, which makes up a large proportion. Over time, the behavior regarding credit cards has also changed. Today, we view it not just as net receivable from a revolving perspective or from an asset and earnings perspective but as an enabler for our liabilities or deposits. Srini has mentioned in the past that we are very proud of the fact that spending on cards actually contributes significantly to our deposit momentum. Currently, the range is about 20% to 25% of our total deposit growth, driven by healthy balances. So, our focus on credit cards today is more from a transaction perspective rather than just a net receivable basis. As many of you on the call or here pay on a standing instruction basis on due dates, we are quite satisfied with this. This represents a new strategy that we are evolving. We are also recalibrating some aspects of our card business model, which we have been working on and have developed something very encouraging that will greatly benefit our organization.
I want to mention something about the card, specifically regarding the revolving aspect. If we look back to 2020 or earlier and compare it to the current revolving balances, they are slightly below two-thirds of the previous levels. This indicates that the revolvers now are not quite at the pre-2020 levels. The profile of our customers has also changed, which is why we see their deposit balances being a bit more than 5 to 5.5 times, compared to just under 4 times at that time. These customers tend to transact more and maintain higher balances, while the revolving balances are lower in certain segments. Additionally, we have been careful not to liberally increase credit lines, which could push some customers into delinquency. Our credit strategy has been cautious in this regard.
Next question is from the line of Jayant Kharote from Axis Capital.
Sir, one question is on your loan growth broad guidance of above system next year. Sir, I just wanted to understand when we are saying we'll grow above the system, what is our range of assumption for system growth? Because we are seeing some acceleration in the system growth itself where we are moving from this 11% to 13% band to maybe closer to 14%, 15%. If we were to move in that band, would we have accounted for that kind of system growth and we say we can grow above that?
So our understanding as of now is next year, we expect system growth to be between 12% to 13% when you look at nominal GDP and the credit growth that's required to support nominal GDP. So if we're talking about 12% to 13%, we are talking about a couple of percentage points above that going into the next year. We see distribution on the retail side, you've been seeing over the last 2 quarters coming up, our positioning also in the MSME space, given our geographic coverage as well as our suite of products that we have out over there and the wholesale piece, which you would have seen in this quarter again coming back. We do believe that we have the customer segmentation to be able to grow at a couple of hundred basis points over system growth next year.
Great, sir. I think this answers you're working with the 12% to 13% range at least. Second part is, on a broader 3-year or 4-year question. We have seen products like mortgage getting a lot of competitive intensity. PSA banks being well capitalized are probably being more aggressive in vehicle, increasingly auto. Do you see this competitive intensity eroding profitability for the larger players over the next probably 3 years, not a 6-month or 12-month question?
See, we are addressing competition only through relationship and not through pricing. Mortgage product, as you've seen that in the last 12 months, we are not leading through a mortgage product. We are leading through relationships where the mortgage product could be a fulcrum around which we can operate. Same with auto. I do want to let you know that our auto loans are almost a little more than 80% self-funded, which means the customers when they take auto loan, we want their liability accounts. We want them to have balances in that and the loan self-funds itself for the most part within the balance sheet. So it is about relationship offering, and that is part of the engagement in the branch, and it's not just a product and a loan balance sheet building approach.
Having said that, Srini, absolutely in order. I think we do continue to be the largest financiers in the auto loan space in the country. not only in terms of the disbursals but also the book size as well as if you see our year-on-year growth in the entire automobile space, I think that is reflective of what our position is and the target market that we will have. So it is relationship. It is also ensuring that we have the right pricing for the product based on the customer segmentation, and we don't feel any need to do business at price points which don't make economic sense.
And your market reading is, as of now, we are not in that situation where aggression is eroding margins for the broader system, at least in auto?
I'm sorry, I didn't catch your question. Can you repeat it, please?
So not for HDFC, but probably for broader system. Are you seeing that aggression in the auto segment from the public sector or maybe the broader system aggravating in the last couple of quarters?
Yes. We've seen it not only in auto, but also in the home loan product. So these are two products where we have certainly seen some amount of, if I may say, a bit of irrational pricing, but irrational pricing has never sustained. It will play itself out and bury itself in a couple of quarters on the outer side, if not earlier.
Thank you very much. Ladies and gentlemen, we have come to the end of the allotted time for the call. I would now like to hand the conference to Mr. Vaidyanathan for closing comments.
Okay. Thank you, Nirav, and thanks to all the participants for taking the time to attend. At the outset, I again want to mention that we did come 15 minutes late. We did extend to be there. Further questions, any more comments, Investor Relations team will be on standby to guide and help and explain or clarify anything you need today or over the weekend or next week, whenever you desire, we are available. With that, we'll sign off for today. Have a great weekend. Bye-bye.
Thank you very much.
Thank you.
Thank you all. Thank you very much for all the hard work.
On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.