HDFC Bank as of now is enjoying the highest market cap, compared to SBI and ICICI Bank in the Bombay Stock Exchange. Actually many banks including private bank shares are steady but HDFC Bank is doing much much better, compared to any other bank in India.
The main reason is very low NPAs which are just at 2% to 3% only. Unbelievable but it is true. Then how is it possible, when SBI having more than 20,000 outlets, huge ATMs and staff? Similarly, Punjab National Bank having more than 7000 branches also is not able to compete with HDFC Bank.
The ICICI Bank, known to be a pioneer in private sector banks with a very good presence, technical support, huge ATMs and the largest workforce in private sector banks is also notwithstanding the competition from HDFC Bank.
The main reason is portfolio management of HDFC Bank as under;
Corporate loans 5%
Personal loans 74%
Construction finance 12%
Lease rental discounting of commercial property 9%
As corporate loans are hardly 5% of the entire loans, with a maximum loan of RS.100 crore loan per corporate borrower only, the default rate is minimal. This feature attracted investors heavily.
The màjor portion of personal loans is car loans, which account for 35% of the personal loans. The recovery mechanism and follow up of loans is also strong.
The ADF loan for builders is a classic example of product innovation. The entire land under construction is taken as security and the limit for the builder is fixed. The loan is released as per the stage of construction. It will be recovered from the housing finance sanctioned to individuals. The interest rate is the lowest in the market.
Now HDFC Bank taken a decision to link the interest rates as per the changes in the REPO rate of RBI. A similar change will be there in deposits as well. This may attract many customers in future.
Similarly discounting the future rentals of commercial property at an affordable is another good product with the least processing time and hardly 11% p.a interest.
To retain the market share HDFC Bank has decided to tie up with the top four car manufacturers i.e Maruthi Suzuki, Hyundai, Mahindra and Mahindra companies for pre-approved car loans.
They want to improve the portfolio of car loans from Rs.85,000 crore to 92,000 crores during this year. So far the existing customers, no separate KYC checking and income verification etc. The loan amount is decided automatically without manual intervention. Existing customers can simply log in and select the type of vehicle, the colour of the vehicle and dealer, then the loan amount eligible will come to customers.
HDFC Bank is confident of making its share presence as usual, though slowdown is spearheaded by many people. Experts say that as the same promoter is there since its inception in 1996, the policies are not changing.
(The author is a retired Bank Manager with Corporation Bank and the views expressed are his own and this news portal do not necessarily subscribe to the same)