Tag: hdfc bank

HDFC Bank aims to regain lost market share in 1 year after RBI lifts credit card ban, BFSI News, ET BFSI

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HDFC Bank is looking at winning back the market share by number of cards in the next one year, a senior official said on Monday. The largest private sector lender by assets was allowed to issue new credit cards by the RBI last week, over eight months after being banned from doing so due to concerns over repeated technological outages.

Parag Rao, its group head for payments and consumer finance, digital banking and IT told reporters that the bank has set some milestones for itself as it seeks to re-enter the market.

The first is to achieve monthly new credit card sales to 3 lakh, the number right before the ban in November 2020, Rao said, adding that the same will be achieved in three months.

Two quarters after that, it aims to take the monthly new card sales to 5 lakh a month, Rao said, adding that in three to four quarters from now, it plans to regain the market share by number of cards.

Rao added that during the ban, the bank lost its market share by number of cards but was able to maintain the market share on initiatives taken to prod users to spend.

It can be noted that as per data, the bank’s market share by number of cards had come down by around 2 percentage points to under 25 per cent, as smaller rivals including ICICI Bank and SBI Cards seized the opportunity to close the gap.

After the lifting of the ban, HDFC Bank had spoken about coming back with a bang.

Rao said spends on credit cards are 60 per cent higher in April-June quarter on its card portfolio.

The bank will depend on its internal set of customers to grow the number of cards and is also looking at partnering with key players like Paytm announced earlier in the day, to increase its sourcing.

Rao also said that the conservative approach on the credit front will continue for the bank even as it goes aggressively on the new business sourcing.

The bank scrip was trading 0.57 per cent up at Rs 1,522.95 a piece on BSE at 1318 hrs as against gains of 0.43 per cent on the benchmark.



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HDFC Bank sets ambitious target for card issuance, source says, BFSI News, ET BFSI

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India’s most valuable lender HDFC Bank has set out an ambitious plan to more than double monthly card issuance from September after the central bank lifted a temporary ban imposed on HDFC in December, according to a source.

“The sales teams have been asked to meet a target of issuing 500,000 cards a month starting September for the next few months,” said the source with direct knowledge of the matter.

HDFC Bank, which in September 2020 had issued nearly 200,000 cards, did not immediately respond to a request seeking comment.

The latest target is a big jump from a year ago but some analysts said it was achievable given the number of “liability” or savings accounts it has opened this year. Savings account holders are typically sold credit cards and loans by lenders.

“Having added close to 3.65 million liability accounts from Jan 2021 to June 2021, it can easily capture market share in the credit card space,” Macquarie said in a research note.

Earlier the bank said in a regulatory filing that India’s central bank had relaxed restrictions placed on it last year on issuing new credit cards, following outages in the bank’s digital payment services.

The relaxation was welcomed within the company.

“All the preparations and strategising that we have put in place to ‘come back with a bang’ (on credit cards) will now be rolled out,” HDFC Bank Chief Executive Sashidhar Jagdishan said in an internal email to employees, a copy of which was seen by Reuters.

“In the coming months, we will aggressively go to the market with not just our existing suite of credit cards but also new offerings in the form of co-brands and partnership,” Jagdishan said in the email.

With nearly 15 million credit cards in issue, HDFC Bank is the largest lender in the segment with nearly 24% market share. Yet over the last eight months peers such as ICICI Bank and SBI Cards have gained ground.

As of June, ICICI Bank had 11 million credit cards, up from about 10 million in January.

“Lifting of RBI (Reserve Bank of India) restrictions before the festive season augurs well and we expect HDFC bank to turn more aggressive on credit cards over the next few months,” brokerage Motilal Oswal said.

HDFC Bank is the seventh most valuable lender in Asia-Pacific with a market capitalisation of 8.37 trillion rupees ($112.7 billion).



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What made HDFC Bank’s big boss write the Reserve Bank a thank-you note, BFSI News, ET BFSI

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The boss of India’s largest private bank can’t thank RBI enough for the eight-month ban on issuing new credit cards. HDFC Bank‘s CEO Sashidhar Jagdishan in a company-wide communique said the central bank RBI’s embargo enabled the bank to reimagine its IT systems and processes and “turbo-charge” the pace of its technology transformation.

Jagdishan reiterated the bank’s plan to be “back with a bang” in the card space and regain lost market share.

As per Macquarie’s analysis, HDFC Bank lost nearly 180 basis points of market share as of May 2021 since end of November 2020 when the ban on launch of new credit cards came into effect. Their market share slipped to 24% while ICICI Bank and SBI Cards gained 130bps and 37bps to 17.4% and 19.2%, respectively.

The lender also has vast ground to gain and can easily capture back the space it lost after it added 36.5 lakh liability accounts from January to June 2021,1.5-2 lakh credit cards per month pre-Covid.

“I am thankful for the rap on the knuckles from the regulator. This rap has opened our eyes to the world of possibilities,” Jagdishan was quoted as saying in a TOI report. “In the coming time, we will be able to demonstrate the technology transformation that we have embarked on.”

Jagdishan also wrote of HDFC’s future credit card rollout plans. He added that business generation activities would continue under the Digital 2.0 initiative until further review. He plans to scale operations safely by building a ‘digital factory’ and an ‘enterprise factory’.

“Overall, lifting of RBI restrictions before the beginning of festive season is a positive development as HDFC Bank has usually been aggressive during festive season and offers various discounts on consumer products,” said Nitin Aggarwal, research analyst, Motilal Securities.



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What HDFC Bank re-entry means for the credit card market, BFSI News, ET BFSI

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HDFC Bank‘s return to issuing new credit cards is likely to shake up and start a war, which may see customers showered with new offers and discounts.

The credit card market is already subdued with the American Express still under ban, Citi looking to sell its credit card business and MasterCard ban hitting new card issuances

HDFC Bank plans

HDFC Bank’s managing director and chief executive Sashidhar Jagdishan has already sounded the bugle by saying that said the largest private sector bank will be aggressive and “come back with a bang” as it seeks to win back lost market share in the credit card segment.

“With the lifting of the restriction on cards acquisition, all the preparations and strategising that we have put in place to ‘come back with a bang’ will now be rolled out,” Jagdishan said in an email to its over 1.2 lakh employees.

Conceding that the bank has lost customer market share in the over nine months of the ban, Jagdishan said it will go aggressively to the market with its existing products and also launch new ones in the form of co-brands and partnerships.

“I am confident that we will regain and grow our customer market share and revenue market share in the time to come. We have the resources and plans in place to further reinforce our pole position in the credit card segment,” he said.

The bank is likely to be aggressive in its upcoming annual Festive Treats for retail customers, wherein it offers discount, cashbacks, reward points, and reduction in processing fees and foreclosure charges. “Overall, lifting of RBI restrictions before the beginning of festive season is a positive development as HDFC Bank has usually been aggressive during festive season and offers various discounts on consumer products,” Motilal Oswal Securities said.

The number game

HDFC Bank had the highest 14.8 million outstanding credit cards as of June 30, which was down by 558,545 from November 30 figures, when the RBI banned new card issuances.

Since then State Bank of India‘s outstanding credit cards have increased by 748,707 to 12 million, while those of ICICI Bank rose by as much as 1.3 million to 11 million. Axis Bank has added 0.3 million cards during the same period. ICICI Bank and SBI Cards have sharply ramped up their incremental market share at 49% and 28% during this period.

According to Macquarie Capital Securities (India) HDFC bank added close to 3.65 million liability account in January-June and hence, it could easily capture market share in the credit card space. It added that HDFC Bank roughly used to add 1.5-2 lakh credit cards per month before the pandemic, which translates into 1.4-1.8 million loss of credit card addition due to the ban. “There is a large customer base to which it can cross-sell,” Macquaire Capital said.



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HDFC Bank goes abroad for risky bond sale after India clampdown

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HDFC Bank Ltd. sold a riskier dollar bond overseas that helps bolster its balance sheet, in a move that local peers may follow after the market regulator tightened its rules in the domestic market.

The country’s biggest lender by market capitalization priced Additional Tier 1 notes in the offshore market at a yield of 3.7 per cent. Those are unsecured securities with voluntary call options but no set maturity. It’s only the second such deal abroad from an Indian lender after the State Bank of India sold such securities in 2016.

Regulatory changes

The overseas debt market may beckon other Indian banks, after the country’s seizure of Yes Bank last year caused losses for individuals on those securities and prompted regulators to introduce stricter investment rules at home. Sales will be constrained though by regulatory limits on how much foreign-currency AT1 debt that Indian banks can issue.

“We expect further issuance from Indian banks given that the domestic market for AT1 issuance has shrunk following regulatory changes,” CreditSights analysts, Yustina Quek and Pramod Shenoi, said in a note.

While Indian banks have largely met their capital requirements, selling more AT1 notes will help them create cash buffers that will let them absorb any more loan losses in a country with world’s worst bad debt ratio. It could also free up funds to extend more loans and make acquisitions.

The Securities & Exchange Board of India ordered in March that local mutual funds, some of the biggest holders of AT1 debt in the country, treat those notes as 10-year debt from April, 20-year bonds a year later and eventually as 100-year notes from April 2023, forcing them to cut their exposure to these issuances. Valuing these bank bonds as longer-maturity bonds would lead net assets to drop at mutual funds.

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HDFC Bank shares shed early gains to close marginally lower on bourses, BFSI News, ET BFSI

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After giving up morning gains, shares of the country’s leading private sector lender HDFC Bank closed marginally lower on the bourses on Wednesday.

The shares jumped nearly two per cent in early trade after the Reserve Bank‘s decision to allow the lender to issue new credit cards but the momentum could not be sustained, with the scrip ending marginally lower compared to Tuesday’s closing level on the BSE and NSE.

It ended the day at Rs 1,512.90 apiece on the BSE. After opening at Rs 1,550, the scrip touched an intra-day high of Rs 1,564.75 and an intra-day low of Rs 1,508.45.

On the NSE too, shares of the lender shed early gains to close slightly down at Rs 1,511.50 apiece.

It had touched an intra-day high of Rs 1,565.35 after opening at Rs 1,556.70. The intra-day low level was Rs 1,508.35.

In a regulatory filing on Wednesday, HDFC Bank said the Reserve Bank of India (RBI), through its letter dated August 17, has relaxed the restriction placed on sourcing of new credit cards.

The central bank had issued orders in December and February to HDFC Bank on certain incidents of outages in the internet banking /mobile banking/ payment utilities of the bank over the past two years.

HDFC Bank also said the restrictions on all new launches of the digital business generating activities planned under Digital 2.0 will continue till further review by the RBI.

Snapping its four-session record-setting spree, the 30-share benchmark BSE Sensex on Wednesday closed 162.78 points or 0.29 per cent lower at 55,629.49. It touched its all-time peak of 56,118.57 during the session.



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Shares of HDFC Bank rise as RBI lifts credit card ban, BFSI News, ET BFSI

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NEW DELHI: Shares in HDFC Bank Ltd jumped after the Reserve Bank of India (RBI) said it would allow the lender to issue new credit cards, partially removing a months-long ban.

The lender will roll out the preparations and strategies it has put in place to “come back with a bang” in credit cards, it said in a statement. It will also “continue to engage with RBI and ensure compliance on all parameters,” it said.

The stock gained as much as 3.4%, the most since May 21, after the bank confirmed the easing of curbs in a stock exchange filing Wednesday, following a Bloomberg News report. Shares were trading 0.6% higher at 1:55 pm in Mumbai.

Still, the central bank will retain a ban on the lender launching new digital products “until further review.”

While recommending a ‘buy’ for HDFC Bank given its attractive valuation, Jefferies India analyst Prakhar Sharma wrote that the bank needs to enhance investment in its technology capacities and strengthen backend monitoring. This will give the RBI greater comfort for lifting the remaining restrictions.

Online glitches

About eight months ago, the country’s most valuable lender was penalized by the RBI for repeated online glitches that hurt its 50 million customers. Following the curbs, the bank, India’s top credit card issuer, lost out to peers including State Bank of India, ICICI Bank Ltd and Axis Bank Ltd.

HDFC Bank’s credit card outstandings shrank by 6.5% in the June quarter from the previous three months, hurting its overall retail portfolio.

The bank has been in the process of setting up digital and enterprise units to strengthen its online infrastructure and handle a larger volume of transactions.

In February, the banking regulator appointed an external audit firm to look into the recurring outages.



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Secondary loan market may help banks exit stressed loans, BFSI News, ET BFSI

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Ten lenders, including the State Bank of India and ICICI Bank, have set up a secondary loan market association to promote the growth of the secondary market for loans in India.

The Secondary Loan Market Association (SLMA) is a self-regulatory body that has been set up with the help of the Reserve Bank of India.

Such a body was recommended by the RBI’s task force on the development of the secondary market for corporate loans headed by Canara Bank chairman T N Manoharan.

The other members of SLMA are Canara Bank, Standard Chartered Bank, Kotak Mahindra Bank, Deutsche Bank, Bank of Baroda, Punjab National Bank, Axis Bank and HDFC Bank.

The SLMA role

The SLMA will facilitate, promote and set up an online system for the standardisation and simplification of primary loan documentation, and standardisation of documentation for the purchase and sale/assignment documentation and other trading mechanisms for the secondary loan market and its documentation.

Banks can sell specific loans which could open up more lending opportunities, manage asset-liability mismatches, reduce concentration risk and comply with the RBI’s large exposure framework. The market can provide lenders to exit stressed loans even before a default.

The RBI task force recommendations

The task force recommended that loan documentation be standardised, plus the setting up of a Central Loan Contract Registry (CLCR), an ecosystem for enabling virtual information-sharing with various repositories, and the development of an appropriate menu of benchmark rates to be commissioned by the SRB.

It proposed that, for each corporate account, the SRB stipulate a minimum ticket size for trading as a percentage of the loan outstanding.

The task force has flagged roadblocks and these need to be speedily removed. One is the glaring absence of a systemic loan sales platform, another is the lack of an ‘effective, reliable and diligent’ price discovery mechanism, and, not least, the reality of insufficient participants.

Other issues include stamp duty during due diligence and transfer, and regulatory restrictions too.

The bottom line is that an efficient secondary market for corporate loans would have clear-cut benefits for both borrowers and lenders and lead to an active corporate bond market as well.



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Will be “back with a bang” on credit card rollout, says HDFC Bank, BFSI News, ET BFSI

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Private lender HDFC Bank on Tuesday said that all preparations are in place to be back with a bang on credit cards and new schemes will be rolled out soon. The bank had earlier stated that it has lined up a series of new card launches in anticipation of RBI lifting its ban.

Eight months after a ban was imposed, in a letter to the HDFC Bank board on Monday, the RBI communicated that it has decided to lift restrictions on launching new credit cards while the restrictions on launching new projects under digital 2.0 was still in place. Last month the lender’s chief Sashidhar Jagdishan had stated that the bank has complied with 85% of the requirements of RBI on the technology front.

“All the preparations and strategies that we have put in place to ‘come back with a bang’ on credit cards will be rolled out in the coming time,” the lender said in a press statement. “We would like to inform all that the Reserve Bank of India has lifted the restriction placed on sourcing of new credit cards. We thank the regulator for this. The board has taken note of the same and the bank is committed to full compliance of the regulatory directions.”

The bank added that it will continue to engage with the regulator and ensure compliance on all parameters, so that the restrictions imposed on new launches of the Digital Business generating activities planned under Digital 2.0 could be lifted soon.

The RBI has asked the bank to submit a board-approved letter indicating continued compliance with its IT examination report.

“The ban has come before the festive season which starts from September onwards in India, so the juggernaut can roll with full force and launch credit cards, attractive schemes within their ecosystem partners and be a force to reckon with,” said Suresh Ganapathy, associate director, Macquarie Capital.

As per Macquarie’s analysis, HDFC Bank lost nearly 180 basis points of market share as of May 2021 since end of November 2020 when the ban on launch of new credit cards came into effect. Their market share slipped to 24% while ICICI Bank and SBI Cards gained 130bps and 37bps to 17.4% and 19.2%, respectively.

The lender also has vast ground to gain and can easily capture back the space it lost after it added 36.5 lakh liability accounts from January to June 2021,1.5-2 lakh credit cards per month pre-Covid.

“Overall, lifting of RBI restrictions before the beginning of festive season is a positive development as HDFC Bank has usually been aggressive during festive season and offers various discounts on consumer products,” said Nitin Aggarwal, research analyst, Motilal Securities.



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Reserve Bank allows HDFC Bank to sell new credit cards

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HDFC Bank on Wednesday said Reserve Bank of India (RBI) has relaxed the restrictions placed on the bank to issue new cards.

RBI had issued orders in December and February to HDFC Bank on certain incidents of outages in the internet banking /mobile banking/payment utilities of the bank over the past two years.

“As a further update to the above intimations, we wish to inform you that the RBI vide its letter dated August 17, 2021, has relaxed the restriction placed on sourcing of new credit cards,” it said in a regulatory filing.

Also read:New credit cards: RBI partially lifts curbs on HDFC Bank

The board of directors of the bank has taken note of the said RBI letter, it said. HDFC Bank said the restrictions on all new launches of the digital business generating activities planned under Digital 2.0 will continue till further review by RBI.

“We will continue to engage with RBI and ensure compliance on all parameters,” the bank said. Stock of HDFC Bank traded 2.06 per cent up at ₹1,546.00 apiece on BSE.

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