For all its success, HDFC Bank faces stiff competition in its stronghold retail segment, where the default rate is low, as several lenders including ICICI, SBI and IndusInd Bank Ltd have rushed to expand into home and auto loans.
With the central bank planning to issue new Banking licences, the landscape could become even more competitive for HDFC Bank, putting pressure on its margins, analysts say.
Its net interest margins - a key gauge of bank profitability - now stand at more than 4 percent, one of the sector's highest.
"That would mean tougher competition for customer acquisition as well as pricing," said A.S.V. Krishnan, an analyst at Ambit Capital, which rates HDFC Bank a 'sell' due to its high valuation.