India Ratings and Research (Ind-Ra) has reaffirmed HDFC Bank 's Long-Term Issuer Rating at 'IND AAA' with a Stable Outlook, underscoring the bank's robust financial position and market leadership. The rating agency has also assigned and affirmed ratings for various debt instruments, including a new tranche of certificates of deposit.

Key Rating Actions

• Long-Term Issuer Rating: Affirmed at 'IND AAA' with Stable Outlook
• Certificates of Deposit (INR 300 billion): Newly assigned 'IND A1+'
• Certificates of Deposit (INR 950 billion): Affirmed at 'IND A1+'
• Fixed Deposits: Affirmed at 'IND AAA' with Stable Outlook
• Infrastructure Bonds (INR 200 billion): Affirmed at 'IND AAA' with Stable Outlook
• Basel III-compliant Tier 2 Bonds (INR 250 billion): Affirmed at 'IND AAA' with Stable Outlook
• Basel III-compliant Tier 1 Bonds (INR 150 billion): Affirmed at 'IND AA+' with Stable Outlook

Rationale Behind the Ratings

The affirmation of HDFC Bank's ratings reflects its position as the largest private sector bank in India, with a market share of 12.0% in deposits and 14.4% in net advances. The bank's systemic importance is further emphasized by its classification as a domestic systematically important bank by the Reserve Bank of India.

India Ratings highlighted HDFC Bank's financial strength, diverse earning profile, and sustained strong performance through economic cycles. The bank's retail focus on both assets and liabilities has resulted in a high-yielding granular asset book and a stable, robust funding profile.

Key Financial Metrics

Strengths and Challenges

The rating agency noted several strengths, including HDFC Bank's stable through-the-cycle performance, strong capital buffers, and high provision coverage ratio. The bank's CET1 ratio stood at 17.5% in Q2FY26, providing a sufficient cushion for the next two to three years.

However, India Ratings also pointed out that HDFC Bank's focus on bringing equilibrium to its loan-to-deposit ratio may constrain near-term loan growth. The bank's CD ratio has declined from a post-merger peak of 110% in Q3FY24 to 98% in Q2FY26, with management aiming to bring it back to the pre-merger range of 85-90%.

Liquidity and Funding

HDFC Bank maintained a liquidity coverage ratio of 120% in Q2FY26, well above the regulatory requirement of 100%. The bank's strong deposit franchise and market access provide comfort in terms of its funding profile.

The reaffirmation of HDFC Bank's ratings by India Ratings underscores the bank's strong market position and financial performance. As the largest private sector bank in India, HDFC Bank continues to demonstrate resilience and stability in its operations, supporting its 'AAA' rating in the Indian banking sector.

Mumbai's Economic Offences Wing (EOW) is set to question HDFC Bank 's top leadership in connection with the ongoing Lilavati Hospital Trust case, marking a significant development in the investigation.

Key Points

• Investigation Target: HDFC Bank's MD & CEO, Sashidhar Jagdishan
• Investigating Authority: Mumbai Police's Economic Offences Wing
• Case in Focus: Lilavati Hospital Trust case

Details of the Development

The Economic Offences Wing of Mumbai Police has decided to call in Sashidhar Jagdishan, the Managing Director and CEO of HDFC Bank, for questioning. This move brings the bank's top leadership into the ambit of the ongoing investigation related to the Lilavati Hospital Trust case.

Implications

This development signifies:

1. The expanding scope of the investigation
2. Potential scrutiny of HDFC Bank's involvement or knowledge regarding the case
3. Increased attention on corporate governance and accountability in the banking sector

What's Next

As the investigation unfolds, it remains to be seen:

• The nature and extent of questions posed to Jagdishan
• Any potential impact on HDFC Bank's operations or reputation
• Further developments in the Lilavati Hospital Trust case

It's important to note that being called for questioning does not imply wrongdoing. As the investigation is ongoing, more details are expected to emerge in the coming days.

Investors and stakeholders of HDFC Bank will likely be watching these developments closely, given the bank's prominent position in India's financial sector.