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BW Businessworld

HDFC Bank: Simply Peerless!

‘We were able to manage bad loans much better than the industry. The metric that best captures the performance is the domestic loan growth, which stood at about 23.7%’

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It is one of the most “awarded banks” in India; perhaps the world. It is said to bag an average of at least 40 such honours every year. And here is one more to adorn HDFC Bank’s Managing Director Aditya Puri’s corner-room — for being the best in its universe in the BW Businessworld ‘Most Respected Companies’ Survey 2017; a repeat in 2018 will make for a hat-trick.

So, what makes HDFC Bank such a standout performer? The survey didn’t specifically seek respondents to parse financials when they were asked to rate a firm to rank them on “respectability”, but you can’t deny a large part of it is derived from the “perception” of the same. When it comes to banks, it will, in very large measure, be based on whether loans doled out are paid back by borrowers on schedule — a reflection of both due-diligence and ethics practised by them. You will also have to agree the usage of the term “NPAs” will not draw blank expressions in millions of drawing rooms across the country; let us get to the numbers on this front.

Mint Road’s financial stability report (FSR-June’17) says the gross NPAs of bank’s rose to 9.6 per cent at end-March 2017 from 9.2 per cent at end-September 2016; it is set to worsen to 10.2 per cent by end-March 2018. It also notes a severe credit shock is likely to impact capital adequacy and profitability of a significant number of banks. That is the big picture for you. And now let us situate the bank Puri built when it comes to dud-loans.

At end-March 2017, HDFC Bank’s gross NPAs stood at 1.05 per cent; the net at 0.3 per cent. Total restructured assets (including applications under process for restructuring) was 0.06 per cent. As a matter of abundant caution, the bank provides more than the regulatory minimum for its NPAs while adhering to provisioning norms.

“What is more, we were able to manage bad loans much better than the industry. The metric that best captures performance is the domestic loan growth which stood at about 23.7 per cent against the overall banking system loan growth of around five per cent,” says Puri. The performance “assumes even more significance as it came in the face of demonetisation which led to growth pangs in the third quarter”, he adds.

Respect is not just about numbers. It is also about having heart. Out here, there is something to be said about a strong brand built on the twin engines of customer and community centricity. Like creating “sustainable communities” through its social initiatives, which help folks break out of the vicious circle of poverty and enable them to lead a better life. In pursuance of its Board mandate to make one crore families economically self-reliant, the bank has covered 68 lakh families at the bottom of the pyramid; it also does more than the mandatory two per cent of net profits on the corporate social responsibility spend.

The banks launched under the aegis of Swachh Banking, ‘Dhanchayat: Financial Literacy on Wheels’. Dhanchayat is an educational film created to raise awareness about the perils of borrowing from informal sources of finance. The ‘Dhanchayat’ video vans travelled across India, covering thousands of villages to showcase the importance of transparency in financial transactions. And to highlight to rural stakeholders, the dignity and self-respect accorded to the individual while borrowing from organised sources of finance. This programme has covered over 4,900 villages and the film has reached over 9.94 lakh people.

You have to be relevant to the times you play in. It explains why HDFC Bank made it to WPP ‘BrandZ Top 100 Most Valuable Global Brands’, with the valuation methodology of Millward Brow — it came in at 74th. Few banks out of India can claim to such an honour. But as we said right at the start, it is just another feather in HDFC Bank’s crown!