NBFCs Poised to Outperform as Banks Face Deposit Crunch – Sabharwal

Concerns over deposit growth, liquidity stress and slowing consumer demand dominated a wide-ranging discussion with market expert Sandip Sabharwal on ET Now, touching upon banks, NBFCs and the evolving dynamics in the quick service restaurant (QSR) space.

The conversation began with banks, where questions arose about lenders’ ability to balance loan growth with deposit mobilization. ET Now highlighted concerns around HDFC Bank and ICICI Bank, pointing to issues such as loan-to-deposit ratios (LDRs). HDFC Bank’s management guides for an LDR of 85–90 percent, but calculations suggest even 90 percent appears challenging given the current pace of deposit accretion. This broader concern extends beyond private lenders; several banks, including PSU names such as Punjab National Bank, struggle to attract deposits despite strong loan growth.

Sandip Sabharwal acknowledged that deposit growth presents a significant challenge across the system. He attributed this largely to liquidity pressures driven by persistent foreign institutional investor outflows and the trade deficit, which drain liquidity from the banking system. He believes even measures taken by the Reserve Bank of India on the liquidity front are being neutralized by thes external pressures.

He added that PSU banks could face a bigger challenge going forward.