Core Insights - HDFC Bank Limited is under investigation due to a significant disparity between its deposit growth and loan growth following its merger with HDFC Limited [1][2] Group 1: Company Performance - Post-merger, HDFC Bank has shown healthy credit expansion, leveraging its enhanced distribution network and customer base, but deposit growth has not kept pace with loan growth [2] - The bank's quarterly updates indicate that credit growth consistently exceeds deposit growth by substantial margins, a trend observed over multiple reporting periods [2] Group 2: Funding and Profitability - Deposits are crucial for a bank's balance sheet and serve as the primary funding source for loans; prolonged loan growth outpacing deposit growth may force banks to seek alternative funding sources, which are typically more expensive [3] - The reliance on higher-cost funding channels can compress the spread between lending rates and funding costs, negatively impacting bank profitability [3] Group 3: Industry Context - The situation at HDFC Bank aligns with a broader trend in the Indian banking sector, where overall credit growth has outstripped deposit growth [4] - As the largest private sector lender, HDFC Bank's challenges in deposit mobilization are particularly significant for the overall banking system, prompting market participants to focus more on liquidity metrics [4] Group 4: Market Reaction - Following the latest business update, which did not show an increase in deposit gathering, HDFC Bank's shares fell by over 5%, underperforming against the Nifty 50 index and banking sector benchmarks [5] - Increased trading volumes were noted as institutional investors adjusted their portfolios, with significant block deals occurring during the selloff [5]