A Study on Asset and Liability Management of HDFC Bank Limited

This report examines the Asset and Liability Management (ALM) framework of HDFC Bank Limited, with a focus on how the bank manages its financial assets and liabilities to maintain stability, liquidity, and profitability. The study gains special relevance in the context of the 2023 merger between HDFC Bank and its parent company, Housing Development Finance Corporation, which significantly impacted the bank's balance sheet, notably increasing the Loan-to-Deposit Ratio (LDR) to 110%. Using secondary data from annual reports and the bank's official website, the analysis covers the period from 2018 to 2023 and utilizes tools such as comparative financial statements, trend analysis, and regression models. Key findings indicate consistent growth in equity share capital, reserves, net worth, deposits, investments, and advances, though borrowings and other liabilities showed some fluctuations. Regression results with R² values above 99% suggest a strong relationship between historical and current financial indicators, affirming the success of HDFC Bank's ALM strategies. Nonetheless, the study notes post-merger challenges in sustaining optimal liquidity and regulatory compliance. It concludes that ALM is essential for managing interest rate and liquidity risks, especially during significant structural changes.