Investors should pay close attention to the Loan-to-Deposit Ratio (LDR) when evaluating banking stocks. A high LDR indicates a bank is actively lending its deposits, which can boost profitability through higher interest income. However, it can also signal potential liquidity risks. Understanding LDR helps investors assess a bank’s financial health and risk profile.

Loan-to-Deposit Ratio (LDR)

The Loan-to-Deposit Ratio (LDR) plays a crucial role in influencing a bank’s net interest margin (NIM). A higher LDR indicates that a bank is lending more of its deposits, potentially boosting NIM, as loans generally yield higher returns than deposits. However, an overly high LDR can pose liquidity risks, leading to increased funding costs and possible pressure on NIM. Maintaining an optimal LDR helps banks maximise interest income while safeguarding financial stability and ensuring adequate liquidity buffers.

1. HDFC Bank

HDFC Bank demonstrates the most significant surge in LDR among major Indian banks. Notably, its ratio jumped to 107.95% in 2024 from 88.27% in 2023. 

The bank’s deposits surged to ₹2,376,887.28 crores, while loans expanded to ₹2,565,891.41 crores following the HDFC merger. Consequently, this 19.68 percentage point increase reflects the combined entity’s portfolio integration. Furthermore, the bank aims to optimise these post-merger LDR levels. As part of its strategy, HDFC Bank plans to gradually align ratios with industry standards.

2. ICICI Bank

In contrast to its peers, ICICI Bank shows a more conservative approach to lending. The bank’s LDR decreased by 2.17 percentage points, reaching 87.34% in 2024. 

ICICI Bank’s deposits rose to ₹14,43,579 crores, while loans grew to ₹12,60,776 crores. Subsequently, this decline suggests a balanced focus on deposit mobilisation and lending growth. Therefore, the bank maintains a comfortable buffer between its deposits and loans.

3. Axis Bank

Axis Bank maintains a steady upward trajectory in its lending operations. Specifically, its LDR increased to 93.65% in 2024 from 91.81% in 2023. 

The bank’s deposits expanded to ₹10,67,102 crores, accompanied by loan growth to ₹9,99,333 crores. Additionally, this 1.84 percentage point rise reflects a calculated approach to credit expansion. 

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4. State Bank of India

SBI exhibits the most conservative LDR among major banks. Initially, its ratio stood at 76.20% in 2024, up from 73.13% in 2023. 

SBI’s massive deposit base grew to ₹49,66,537 crores, while loans increased to ₹37,84,272 crores. Meanwhile, this modest 3.07 percentage point increase aligns with SBI’s risk-averse approach. Above all, the bank maintains substantial headroom for lending expansion.

5. Kotak Mahindra Bank

Kotak Mahindra Bank shows a strategic shift toward balanced growth. The bank’s LDR decreased to 96.65% in 2024 from 99.40% in 2023. 

First, its deposits grew to ₹4,45,268 crores, while loans expanded to ₹4,30,351 crores. Subsequently, this 2.75 percentage point reduction indicates a focus on deposit mobilization. The bank maintains a healthy balance between lending and deposit growth.

Written By Fazal Ul Vahab C H

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