Guess who is the top runner in the list of safe banks in India?

 Who is the leading runner in the top 75 most valuable Indian Brands ranked by WPP Kantar BrandZ?

Well, here we are talking about the leader in Indian Banking Space, the market forefront runner in retail space, and the Golden Boy of India – HDFC Bank. It has been termed as the safest bank in India. Safe, because the customers and investors have huge confidence in its management and operational skills. Safe, because it has abundant assets to cope up with the financial distress. It has a brand value of around $20.3 billion which justifies its growth.

So far, the bank has been successful in building a strong wall amid the pandemic but the influence of the virus is so strong that no such thing has remained untouched by the virus- be it a human or any business. This has forced the bank to bring change in its business model. Let’s find out the upcoming challenges for the bank and how it guards itself against the heavy storm.

 Who is the leading runner in the top 75 most valuable Indian Brands ranked by WPP Kantar BrandZ?

Well, here we are talking about the leader in Indian Banking Space, the market forefront runner in retail space, and the Golden Boy of India – HDFC Bank. It has been termed as the safest bank in India. Safe, because the customers and investors have huge confidence in its management and operational skills. Safe, because it has abundant assets to cope up with the financial distress. It has a brand value of around $20.3 billion which justifies its growth.

So far, the bank has been successful in building a strong wall amid the pandemic but the influence of the virus is so strong that no such thing has remained untouched by the virus- be it a human or any business. This has forced the bank to bring change in its business model. Let’s find out the upcoming challenges for the bank and how it guards itself against the heavy storm.

Challenges for the Bank:

The upcoming challenge for the bank is the emergence of new PSBs generated after the merger of various public sector banks. Small Finance Banks and FinTech’s are also in the battle to generate more market share.

And the recent issue is the lawsuit filed by two US Firms for allegedly misleading shareholders with their asset quality disclosures. To which the management has responded that they have a strong belief in the culture of the bank and no act of wrongdoing has been observed in the business from the past 25 years and they still continue with the same practice.

The bank is on its journey to huge digital transformation because that is the only way to sustain itself in the market and remain operational during the lockdown in many parts of the country. The challenge in the digital banking space would be to look after Cyber Security issues and Data Privacy.

To remain protected and guarded against unprecedented times, they have built up a huge chunk of provisions and capital buffer. But this protection comes up with the cost. The cost of loss in earnings and credit growth.

The challenge is how the upcoming CEO Sashidhar Jagdishan takes up the legacy of twenty-five years to new heights.

Pillars of Strength:

The foundation of the bank is built on the following strong pillars – Liquidity, Credit quality, Risk standards, Provisions, NIM (Net Interest Margin), and an adequate amount of capital.

It has been coined the term of being the largest private sector bank with small amount of NPAs in its bucket and huge profits for its shareholders. It’s a belief that even if the shares of the bank fell by 30% it would still remain the most expensive bank in the country. It has been moving in such a way that there is no looking back in the past. The question which has been frequently tossed in the market is what guarded them off during the pandemic? Following are the reasons behind their growth story:

  • Their lending business has been mainly restricted to high scale corporate borrowers and prime retail customers.
  • The credit also goes to the rural economy which remains isolated from the virus.
  • Robust crop season and healthy income in the hands of the farmers.
  • The good point is that the bank cares about all those people who are part of its growth. There has not been any laying off, in fact the employees were given full and timely payments.

The shield created by the bank is nothing less than the superhuman effort and it still continues to do so.

Upcoming Strategies:

There has been fear amongst the investors and employees that given the rise of Fintech’s, they will be blown out of the market. But the bank understands that the only constant thing is Change which will open up the gates for better opportunities. They are working on changing their business model with better and faster customer delivery and low transaction costs.

To be part of the Indian growth story, the bank needs to increase its market share in rural and semi-urban areas as the urban market has reached its saturation. It has to revamp its wholesale banking space because the margin in retail banking space is shrinking due to competition.

NPA of the bank can widen up to 2.08% which was last seen during the global financial crisis. The bank is aware of the fact that their asset quality will deteriorate more once the supervisor puts an end to the moratorium period but they have such high-risk standards and benchmarks that they are not willing to compromise on them so easily.

Recently, they have made an announcement of the deployment of whooping INR 47000 crore in affordable housing. The step to provide higher loans has been taken to easily penetrate into this space. This seems like an interesting proposition to lure customers.

The bank is also trying to build new digital space and cross-sell its product just like China’s Ping An Bank. For this, it has made tie-ups with several Health chains and car dealers’ platforms.

They want to become the new Amazon, Google, or Netflix of the Banking World. The plan is quite ambitious but it depends on how the new CEO onboard the train. Since its inception in 1994, Mr. Aditya Puri has held the grip tight and taken the legacy forward. He has taken care of the bank as his own child. He was amongst the first few employees and the first CEO of the bank. The succession story is much awaited in the banking space as the economy is going through unseen changes. The biggest challenge for the new CEO would come up from the business side as the COVID outbreak is on its peak and it has already created a lot of destruction in the market. Well, a lot is there on the plate for Mr. Jagdishan. Let’s see how well he takes it ahead.

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