 "We will continue to grow faster than market: Aditya Puri")
Aditya Puri, Managing Director, HDFC Bank, believes that the bank straddles India's GDP in such a way that as India grows, so does the bank. Edited excerpts from an interview with Malini Bhupta:
What worries you the most as a banker at this point?
I am concerned about how things are moving in terms of digitisation, big data and customer expectation. And is the sales force equipped to deal with these changes? Are we in the right segments? I am thinking of who my competitor will be a few years down the line. Will it be a telecom or a technology company?
What about existing tie-ups with telecom players?
They have to figure out whether they want to become a bank or a payment gateway. The fact is there are more mobile phones than there are bank branches, so the idea was to try and see if banking products can be taken to the last mile in a cheaper manner. That would require collaboration, which is never easy.
Why do banks want to enter rural India, given the challenges?
If India has to grow, the Bharat and India divide has to go. As India invests in infrastructure, per capita income will go up. Expectations are also changing from corporations. We went through a very materialistic phase where we only delivered to shareholders. Today we have to play a part in society.
What kind of financial needs does a rural consumer have, and how do you service them?
If you go to rural India, you see tractors, LCVs, mounds of wheat, motorcycles, a tailor, a tea shop and women with lots of gold jewellery. So what products do you offer them? You have crop loans, tractor loans, two-wheeler loans, personal loans and micro-finance. Then you look at delivery models and collection methods.
Do you think that rural India's credit culture has been affected by loan waivers?
To some extent it will destroy the credit culture, but should that be a reason not to go to rural India? The rural population does not have a higher proportion of delinquencies.
You have clear long-term and short-term objectives when it comes to sustainability. Can you elaborate?
We have to work on long-term issues to improve health, sanitation and education, but we have short-term goals too. We have a sustainable livelihood initiative programme, which will be the largest private initiative globally and will make 10 million families self-sufficient. Assuming 50 per cent people in the family are women, around 50 million women will be brought from below poverty line to above the poverty line.
The market believes that the golden era of private banks is over, as a host of new banks are expected to enter the fray?
If new banks come and it takes them 8-10 years to get to a size that is of any significance, there is no problem for existing private banks.
What is your opinion on big corporate houses entering banking?
I believe if the large groups are groups with integrity and there are enough regulations to ring-fence the bank from the group, it should not be a problem.
The understanding is that not many may get licences?
If you do not give forbearance to large corporates that have finance companies to convert into banks, and they have to maintain SLR, CRR and priority sector lending, it cannot be feasible to convert. The purpose is to take banking to the unbanked areas which is serviced by the unorganised sector. A new bank without a major backing behind it is not going to be able to do it.
HDFC Bank has long been known as the 30 per cent bank thanks to your consistent record in terms of profitability. What is with this number?
We are neither a 20 per cent nor a 30 per cent bank. We are a very consistent bank in terms of ensuring that we straddle India's GDP such that India grows and so do we. I have told analysts that you must be living in cuckoo land if you think we can grow at the same rate when GDP growth rate is 8 per cent and 4 per cent.
Your numbers suggest otherwise. GDP growth has halved but your profitability remains at 27 per cent.
The secret is that the banking system's growth will be 3-3.2 times GDP growth and we will grow four to five per cent more than that. The secret is that we have the widest product range and have a brand that is accepted widely in India. We are established in semi-urban and rural. Fifty-five per cent of our customers are retail. So it's obvious that we will grow faster than market.
What worries you the most as a banker at this point?
I am concerned about how things are moving in terms of digitisation, big data and customer expectation. And is the sales force equipped to deal with these changes? Are we in the right segments? I am thinking of who my competitor will be a few years down the line. Will it be a telecom or a technology company?
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They have to figure out whether they want to become a bank or a payment gateway. The fact is there are more mobile phones than there are bank branches, so the idea was to try and see if banking products can be taken to the last mile in a cheaper manner. That would require collaboration, which is never easy.
Why do banks want to enter rural India, given the challenges?
If India has to grow, the Bharat and India divide has to go. As India invests in infrastructure, per capita income will go up. Expectations are also changing from corporations. We went through a very materialistic phase where we only delivered to shareholders. Today we have to play a part in society.
What kind of financial needs does a rural consumer have, and how do you service them?
If you go to rural India, you see tractors, LCVs, mounds of wheat, motorcycles, a tailor, a tea shop and women with lots of gold jewellery. So what products do you offer them? You have crop loans, tractor loans, two-wheeler loans, personal loans and micro-finance. Then you look at delivery models and collection methods.
Do you think that rural India's credit culture has been affected by loan waivers?
To some extent it will destroy the credit culture, but should that be a reason not to go to rural India? The rural population does not have a higher proportion of delinquencies.
You have clear long-term and short-term objectives when it comes to sustainability. Can you elaborate?
We have to work on long-term issues to improve health, sanitation and education, but we have short-term goals too. We have a sustainable livelihood initiative programme, which will be the largest private initiative globally and will make 10 million families self-sufficient. Assuming 50 per cent people in the family are women, around 50 million women will be brought from below poverty line to above the poverty line.
The market believes that the golden era of private banks is over, as a host of new banks are expected to enter the fray?
If new banks come and it takes them 8-10 years to get to a size that is of any significance, there is no problem for existing private banks.
What is your opinion on big corporate houses entering banking?
I believe if the large groups are groups with integrity and there are enough regulations to ring-fence the bank from the group, it should not be a problem.
The understanding is that not many may get licences?
If you do not give forbearance to large corporates that have finance companies to convert into banks, and they have to maintain SLR, CRR and priority sector lending, it cannot be feasible to convert. The purpose is to take banking to the unbanked areas which is serviced by the unorganised sector. A new bank without a major backing behind it is not going to be able to do it.
HDFC Bank has long been known as the 30 per cent bank thanks to your consistent record in terms of profitability. What is with this number?
We are neither a 20 per cent nor a 30 per cent bank. We are a very consistent bank in terms of ensuring that we straddle India's GDP such that India grows and so do we. I have told analysts that you must be living in cuckoo land if you think we can grow at the same rate when GDP growth rate is 8 per cent and 4 per cent.
Your numbers suggest otherwise. GDP growth has halved but your profitability remains at 27 per cent.
The secret is that the banking system's growth will be 3-3.2 times GDP growth and we will grow four to five per cent more than that. The secret is that we have the widest product range and have a brand that is accepted widely in India. We are established in semi-urban and rural. Fifty-five per cent of our customers are retail. So it's obvious that we will grow faster than market.