Tag: hdfc bank

HDFC Bank CEO outlines ‘Technology Transformation’ plan to fix digital glitches, BFSI News, ET BFSI

Banking & Finance

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HDFC, which has been hit by several digital glitches since the past year, has embarked on a scale changing technology adoption and transformation agenda to help drive its ambitious future growth plans.

“Our aim is to “Keep Systems ALWAYS ON. ALWAYS SECURE. AND PERFORM at SCALE”. While we execute this Technology Transformation agenda, there will sometimes be pain and outages beyond our control. We must doubly resolve to reach out proactively to our customers / stakeholders and explain the path that we are traversing to make their experience with us smoother, faster and better,” HDFC Bank CEO Sashi Jagdishan wrote in a letter to staff.

Some of the specific initiatives the bank has embarked under Technology Transformation Agenda, according to Jagdishan, include:

1. Infrastructure scalability: We have invested heavily in the scale up of our infrastructure to handle any potential load that we will encounter for the next 3/5 years. We are also in the process of accelerating our cloud strategy to be on the cutting edge leveraging best in class cloud service providers.

2. Disaster Recovery (DR) resiliency:

a. We have strengthened our process of monitoring our Data Centre (DC) and have shifted key applications to new DC.

b. DR switch over for Disaster recovery resiliency has been completed for key customer facing applications including automating DR switch over for key applications.

c. Enhanced monitoring capabilities have been put in place to manage our Data centre operations and Resiliency processes.

3. Security Enhancements: We have strengthened our firewalls further. We have to be scanning the horizon for potential security issues and be ever prepared to face them. We haven’t had any security issues in the past. But this is always an important area of focus and action plans are underway for further robustness.

4. Monitoring mechanisms. An enhanced application monitoring mechanism has been put in place across the board to enable us to keep our IT systems Always On.
Reasons for glitches

On technical issues, Jagdishan gave an elaborate reasoning for failures:

November 2018: Crash of the New Mobile Banking App.

Reason: We faced an unprecedented demand to download the new mobile app. We have learnt and since refined our processes of managing the mobile banking app and has never faced any such challenges later. After the Nov 2018 initial launch, we have upgraded our mobile app seven times over the last two years and in all these instances it has been a smooth affair with no downtime or customer inconvenience whatsoever.

December 2019: Outage with Mobile Banking App

Reason: All banking systems are complicated and interconnected and each component has to work efficiently for us to deliver our promise to our customers. In this instance, one of the vendors system upgrade patch issue was faulty and the same has been addressed adequately. We have and will continue to reinforce vendor patch application.

November 2020: Outage at Data centre

Reason: A third party human error lead to the downtime. To remove this risk completely, we have taken several actions to mitigate such instances in future.

March 1, 2021: Net Banking/Mobile Banking downtime

Reason: The issue here occurred on account a faulty signature on our HIPS (Host Intrusion prevention software). This was an issue acknowledged by the manufacturer which impacted several global clients as well. The faulty signature resulted in slowing down response on Net banking and mobile banking. This has, since, been rectified.

March 31, 2021: Net Banking/Mobile Banking downtime

Reason: The issue occurred on account of a hardware component failure in one of our database servers resulting in a slow response to some of our customers. A large number of our customers were able to carry out their NB/MB activities in this period and we saw only a marginal dip in the number of transactions that day.

“To put things in perspective, in the last 28 months, we have had 5 instances of downtime. Every instance has hardened our resolve to do better keeping our customers in mind,” Jagdishan said.

Advice to staff
Business objectives should be driven keeping in mind the 3Cs that I wrote about in my last communication to you. It is Culture, Conscience and Customers. Continue to keep the humility quotient (HQ) high and make it part of your DNA. I have committed myself to be part of the on-going cultural transformation and I urge each one of you to inculcate and espouse the same mantra down the line. The broad macro opportunities continue to present themselves across the retail, MSME and Corporate Banking for a Bank like us and across geographies’ like semi-urban and rural markets, he said.



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HDFC Bank embarks on tech transformation agenda: MD tells employees

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Having faced multiple episodes of digital banking glitches in the last two years, HDFC Bank has embarked on a ‘Technology Transformation Agenda’ to provide safe and secure banking services to its customers.

HDFC Bank Managing Director Sashi Jagdishan in a letter to employees said the bank has faced five instances of downtime in the last 28 months and every instance has hardened the bank’s resolve to do better, keeping customers in mind.

Also read: RBI asks HDFC Bank to temporarily halt sourcing of new credit card customers

It is to be noted that the RBI temporarily barred HDFC Bank in December 2020 from launching new digital banking initiatives and issuing new credit cards after taking serious note of service outages at the lender over the last two years.

The bank was penalised by the RBI for two major outages, one in November 2018, and the other in December 2019.

Taking a stern view of the repeated outages, RBI Governor Shaktikanta Das had said in December that the regulator had some concerns about certain deficiencies and it was necessary that HDFC Bank strengthens its IT systems before expanding further.

Following this, the bank embarked on a scale-changing technology adoption and transformation agenda to help drive future growth plans.

Giving details of the Technology Transformation Agenda, Jagdishan said that the bank has invested heavily in the infrastructure to handle any potential load that it might encounter in the next three to five years.

“We are also in the process of accelerating our cloud strategy to be on the cutting edge leveraging best-in-class cloud service providers,” he added.

As part of the agenda, he said, the bank has strengthened the process of monitoring the Data Centre (DC) and has shifted key applications to new DC.

“We have strengthened our firewalls further. We have to be scanning the horizon for potential security issues and be ever prepared to face them. We haven’t had any security issues in the past. But this is always an important area of focus and action plans are underway for further robustness,” the letter said.

The country’s largest private sector lender assured employees that their bonuses, promotions and increments are safe like last year despite Covid-19 challenges.

“In the current financial year, there will be some pandemic-related challenges for sure. The beauty of this organisation is the ability to rally around, tap the opportunities and grow. The story of the bank will not be any different in this financial year and in the coming times,” he said in his address.

The bank will continue to invest in resources to grow in the identified segments or sectors and geographies, it added.

“Business objectives should be driven keeping in mind the 3Cs that I wrote about in my last communication to you. It is Culture, Conscience and Customers. Continue to keep the humility quotient (HQ) high and make it part of your DNA,” he said.

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Despite healthy Q4 result, HDFC Bank believes tough times have begun for FY22, BFSI News, ET BFSI

Banking & Finance

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Amid the second COVID-19 wave, India’s largest private sector lender HDFC Bank reported on Saturday, an 18.2% y-o-y rise in net profit to Rs 8,186.51 crore for the quarter ended March. The Bank had posted a net profit of Rs 6,927.69 crore in the year-ago period. The Bank’s Net Interest Income also witnessed a 12.6% y-o-y rise to Rs 17,120 crore in the quarter under review, as compared to Rs 15,204 crore in the year-ago period.

HDFC Bank on Saturday also said that it has set aside ₹500 crore as provisions to cover the Supreme Court-directed compound interest refund to all borrowers during the March-August period.

Srinivasan Vaidyanathan, CFO of the bank, said that while the Indian Banks’ Association (IBA) is still working out the methodology of computing the refund, It is estimated that the waiver bill would be in the range of ₹7,000-7,500 crore. To be sure, the government has borne the waiver cost of ₹6,500 crore for borrowers of up to ₹2 crore in certain sectors announced last October.

In a regulatory Filing the private lender further added that the impact of COVID-19, including changes in customer behaviour and pandemic fears, as well as restrictions on business and individual activities, has led to significant volatility in global and Indian financial markets and a significant decrease in local economic activities.

The slowdown during the year has led to a decrease in loan originations, the sale of third party products, the use of credit and debit cards by customers and the efficiency in collection efforts.

“The extent to which the COVID-19 pandemic, including the current “second wave” that has significantly increased the number of cases in India, will continue to impact the Bank’s results will depend on ongoing as well as future developments, which are highly uncertain, including, any new information concerning the severity of the COVID-19 pandemic and any action to contain its spread or mitigate its impact whether government-mandated or elected by us.” HDFC Bank said in a statement, addressing the recent surge in covid cases in the country.

Lockdowns not only disrupt loan growth but also impact loan repayment collections. Banks are expected to give the true picture of their asset quality in the March quarter after the Supreme Court refused to extend the standstill on reporting of bad loans till August 31.

Early signs of asset quality impact are already visible for HDFC Bank. For the March quarter though, the lender reported gross bad loan ratio of 1.32%, which captures the true picture of asset quality given that judicial standstill on bad loan recognition has been lifted. Investors will now keenly monitor any changes in the lender’s asset quality and its commentary in the wake of the second wave of Covid-19 infections.

Despite healthy Q4 result, HDFC Bank believes tough times have begun for FY22Another major aspect that investors will keenly watch is the impact of the Reserve Bank of India’s order on issuances of new credit cards on the lender’s credit card business. The Reserve Bank of India (RBI) had asked the lender to halt all new issuances of credit cards and digital services offerings till the time it sorts out its technological issues.



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HDFC Bank’s third party IT audit in final stages

Banking & Finance

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The third party independent audit of HDFC Bank’s IT infrastructure is in the final stages. The last outage in its net and mobile banking services on March 30 was not a capacity issue.

The bank is also working with existing customers in the face of the temporary ban in issuance of credit cards.

“The audit by the independent third party is in the final stages, and we will update further as we get to know more from the regulators,” said Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank in an analyst call after its fourth quarter results of the lender on April 17.

HDFC Bank is working on building capabilities in the area of core systems and is also working on migration to cloud for resiliency.

“We are also building new muscle and infusing new talent to execute these strategies and establish a digital factory,” he further said.

On the recent outage in its net and mobile banking services, he said it was “an intermittent issue on net and mobile banking that occurred due to a server hardware component failure, and has no correlation to any capacity issues”.

The Reserve Bank of India (RBI) had in February this year appointed an external IT firm for carrying out a special audit of the IT infrastructure of HDFC Bank, which has faced a number of outages in its digital banking services.

Concerned by the outages, the RBI had on December 2 last year also directed the lender to temporarily halt sourcing of new credit card customers as well as launches of digital business generating activities planned under its proposed programme ‐Digital 2.0.

Credit cards

On the credit card business, Vaidyanathan said the bank is focussing on engaging with existing customers, whose cards are either dormant or inactive to “resuscitate” them.

“This way portfolio activations and card dynamics are up, improving portfolio quality and increasing downstream activity,” he said.

Despite the temporary halt, HDFC Bank’s credit card advances grew by 12.3 per cent to Rs 64,674 crore for the quarter ended March 31, 2021 as against Rs 57,575 crore in the fourth quarter of 2019-20.

The impact of the non-issuance of cards is on new employees in corporates, on boarding of new corporates, Vaidyanathan said, adding that this loss of new customers can normally be made up within a few quarters of stoppage being lifted. This is because the bank continues to source liability customers, who will be pre-approved. “About three-fourths of our sourcing comes from existing customers of the bank,” he said.

Interest on Interest provision

The lender has also kept aside Rs 500 crore for interest on interest provisions, which is being worked with Indian Banks’ Association to standardise the computation across the system.

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HDFC Bank net up 18% on higher other income

Banking & Finance

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On a proforma basis, the gross NPA ratio fell four bps from 1.36% at the end of December 2020.

HDFC Bank on Saturday reported an 18.2% year-on-year (y-o-y) growth in net profit for the quarter ended March to Rs 8,186.51 crore on the back of a 26% y-o-y rise in other income to Rs 7,594 crore, with net interest income (NII) growing 12.6% y-o-y to Rs 17,120 crore.

The bank’s provisions rose 24% y-o-y to Rs 4,693.7 crore. In a statement, HDFC Bank said the total provisions for the current quarter include approximately Rs 1,300 crore in contingent provisions. The bank’s gross non-performing asset (NPA) ratio in Q4 rose 41 basis points (bps) sequentially to 1.32% and the net NPA ratio rose 31 bps to 0.4% as the Supreme Court vacated a stay on recognition of bad loans after August 31, 2020. On a proforma basis, the gross NPA ratio fell four bps from 1.36% at the end of December 2020.

“The bank also continues to hold provisions as on March 31, 2021, against the potential impact of Covid-19 based on the information available at this point in time and the same are in excess of the RBI prescribed norms,” HDFC Bank said.

It held floating provisions of Rs 1,451 crore and contingent provisions of Rs 5,861 crore as on March 31, 2021. Total provisions — comprising specific, floating, contingent and general provisions — were 153% of gross NPAs as on March 31, 2021. The core net interest margin (NIM) in Q4 stood unchanged on a sequential basis at 4.2%.

Total advances as on March 31, 2021, were Rs 11.33 lakh crore, up 14% over March 31, 2020. Domestic advances grew 14.1% y-o-y. Domestic retail loans grew 6.7% and domestic wholesale loans grew by 21.7%. The domestic loan mix as per Basel 2 classification between retail:wholesale was 47:53. Overseas advances constituted 3% of total advances.

Total deposits as of March 31, 2021 were Rs 13.35 lakh crore, up 16.3% over March 31, 2020. Current account savings account (CASA) deposits grew 27%, with SA deposits at Rs 4.03 lakh crore and CA deposits at Rs 2.12 lakh crore. Time deposits stood at Rs 7.19 lakh crore, an increase of 8.5% over the corresponding quarter of the previous year. The CASA ratio was 46.1%, as against 42.2% a year ago.

The lender’s total capital adequacy ratio (CAR) as per Basel III guidelines was at 18.8% as on March 31, 2021, up from 18.5% as on March 31, 2020, and as against a regulatory requirement of 11.075%. Tier-1 CAR was at 17.6% as of March 31, 2021, compared to 17.2% as of March 31, 2020. The common equity tier-1 (CET-1) ratio was at 16.9% as of March 31, 2021. Risk-weighted assets were at Rs 11.31 lakh crore, as against Rs 9.95 lakh crore as on March 31, 2020.

The bank’s NBFC subsidiary HDB Financial Services posted a net profit of Rs 502.8 crore in Q4FY21, down 51.4% from Rs 1,037 crore in Q4FY20. The company’s provisions and contingencies for the quarter were at Rs 613 crore, up 56% y-o-y. The total loan book was Rs 58,947 crore as on March 31, 2021, up 5.4% from Rs 55,930 crore as on March 31, 2020. As on March 31, 2021, the gross NPA ratio based on the approach used for non-bank lenders was 3.9%, up from 3.5% on March 31, 2020 and down from 5.9% as per the proforma approach as on December 31, 2020.

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Why HDFC deposits are a safe option for senior citizens

Personal Finance

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The prevailing low interest rates on deposits have been pinching senior citizens the most. Seniors who are more keen on capital conservation than higher interest rates can consider the deposits from HDFC. Currently, HDFC offers seniors 6.1 per cent interest for 24-month deposits

Depositors who wish to get regular payouts can opt for the non-cumulative option, with monthly/quarterly/half yearly or annual payouts. Those who don’t need regular payouts, can instead opt for the cumulative option which offers annual compounding.

The minimum amount that can be deposited with HDFC for a fixed deposit is ₹20,000.

While the deposits of HDFC, an NBFC, are not covered by deposit insurance (bank deposits of up to ₹5 lakh are covered by DICGC), its 40-year plus stable business provides significant confidence. Besides, the company has been maintaining a AAA rating on its deposits for more than 26 years.

How they fare

As interest rates have almost bottomed out, they are likely to inch up in the next two to three years. Hence, at the current juncture, it is wise to lock into deposits with a tenure of one or two years.

For such tenures, HDFC offers seniors better interest rates than those offered by prominent banks such as SBI (up to 5.6 per cent), HDFC Bank (up to 5.4 per cent), ICICI Bank (up to 5.5 per cent) and Axis Bank (up to 6.05 per cent), which are considered safest options among banks.

Other private sector banks and small finance banks, however, offer even higher rates (up to 7.5 per cent) for one to two year deposits. The recent debacles at YES Bank and other co-operative banks have stoked fear in the minds of depositors. Given that, seniors may prefer safety of capital over the lure of higher rates.

HDFC also offers better rates compared to corporate FDs with similar ratings from other NBFCs such as LIC Housing Finance, that offers up to 5.9 per cent for a tenure of up to 2 years.

About HDFC

Incorporated in 1977, HDFC, a housing finance company currently offers loans to individuals (comprising 76 per cent of the loan book) and corporates (6 per cent). HDFC also lends for construction finance (11 per cent) and lease rental discounting (7 per cent).

With an outstanding loan book of ₹,52,167 crore as of December 2020, HDFC is India’s largest housing finance company. HDFC’s non-performing assets (proforma) are contained at less than 2 per cent. In addition to that, the company’s provisions (cumulative including those related to covid) cover up to 2.56 per cent of the loan book exposure.

As at the end of December 31, 2020, HDFC’s capital adequacy ratio stood at 20.9 per cent, well above the regulatory requirement of just 14 per cent.

HDFC also has several financial subsidiaries –prominent ones among them are HDFC Bank, HDFC Asset Management Company, HDFC Life Insurance, HDFC Credila and HDFC Ergo. Its consolidated profits at the end of the first nine months of FY21 stood at ₹1,33,900 crore.

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HDFC Bank Q4 net profit up 18.2%

Banking & Finance

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Private sector lender HDFC Bank reported an 18.2 per cent increase in its standalone net profit to Rs 8,186.51 crore for the quarter ended March 31, 2021 led by robust growth in its net interest income.

Its net profit was Rs 6,927.69 crore in the fourth quarter of 2019-20.

The bank’s net profit for 2020-21 rose by a similar 18.5 per cent to ₹ 31,116.5 crore from Rs 26,257.32 crore a year ago.

However, on a sequential basis, HDFC Bank’s net profit fell by 6.5 per cent from Rs 8,758.29 crore in the October to December 2020 quarter.

The bank’s net revenue increased by 16.4 per cent to ₹ 24,714.1 crore for the quarter ended March 31, 2021 from ₹ 21,236.6 crore a year ago.

Net interest income grew by 12.6 per cent to Rs 17,120.2 crore for the fourth quarter of the fiscal from ₹ 15,204.1 crore in the corresponding period in 2019-20. This was driven by advances growth of 14 per cent, and a core net interest margin of 4.2 per cent.

Other income grew by 25.9 per cent to ₹ 7,593.9 crore in the fourth quarter of 2020-21 from ₹ 6,032.6 crore in the corresponding quarter ended March 31, 2020.

Provisions and contingencies

Provisions and contingencies for the quarter ended March 31, 2021 increased by 24 per cent to ₹ 4,693.7 crore in the fourth quarter of the fiscal as against ₹ 3,784.5 crore for the quarter ended March 31, 2020.

“The bank also continues to hold provisions as on March 31, 2021 against the potential impact of Covid-19 based on the information available at this point in time and the same are in excess of the RBI prescribed norms,” HDFC Bank said in a statement on Saturday.

It held floating provisions of ₹ 1,451 crore and contingent provisions of ₹ 5,861 crore as on March 31, 2021. Total provisions (comprising specific, floating, contingent and general provisions) were 153 per cent of the gross non-performing loans as on March 31, 2021.

NPA

Gross non-performing assets were at Rs 15,086 crore or 1.32 per cent of gross advances as on March 31, 2021, as against 1.38 per cent (proforma approach) as on December 31, 2020 and 1.26 per cent as on March 31, 2020. Net non-performing assets were at 0.4 per cent of net advances as on March 31, 2021 versus 0.36 per cent a year ago.

The bank’s total Capital Adequacy Ratio was at 18.8 per cent as on March 31, 2021.

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HDFC Bank Q4 net profit jumps 18% on-yr; board decides against declaring dividend in Mar 2021 amid COVID surge

Personal Finance

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HDFC Bank reported an 18.2 per cent on-year jump in standalone net profit to Rs 8,186.51 crore for the January-March quarter of FY21. The company had posted a profit of Rs 6,927.6 crore in the corresponding quarter of the previous year. Amid the second COVID-19 wave, the company informed that its board has considered it prudent to currently not propose a dividend for the financial year ended March 31, 2021. India’s largest private sector lender’s Net Interest Income (NII), the difference between interest earned through lending and interest paid to depositors, witnessed a 12.6 per cent on-year rise to Rs 17,120 crore in the quarter under review, as compared to Rs 15,204 crore in the same period last year. The Bank’s net revenues (net interest income plus other income) rose to Rs 24,713 crore in the fourth quarter of FY21 from Rs 21,236 crore in the previous year.

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HDFC Bank looks to raise ₹ 50,000 crore …

Banking & Finance

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HDFC Bank plans to raise ₹50,000 crore of capital through perpetual debt instruments.

“The bank proposes to raise funds by issuing perpetual debt instruments (part of additional tier I capital), tier II capital bonds and long-term bonds (financing of infrastructure and affordable housing) up to total amount of ₹50,000 crore over the period of the next 12 months through private placement mode,” it said in a regulatory filing.

The Board of Directors would consider this proposal on April 17.

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HDFC Bank gives grants to 21 start-ups, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank, announced the winners of its fourth edition of SmartUp Grants 2021. SmartUp Grants are part of HDFC Bank’s broader initiative to foster the spirit of creativity and enterprise in the start-up space. It is an extension of HDFC Bank’s SmartUp Solution, which provides entrepreneurs with customised banking and advisory services.

The bank collaborated with nine incubators, including IIT Delhi, AIC-Bimtech, IIM Kashipur, IIT BHU, Banasthali University, C-CAMP, GUSEC, T-Hub, and Villgro, to shortlist and mentor the winners. The bank has given out grants worth Rs 19.4 crore in the last four years.

Twenty-one social-impact startups were chosen from 300 applications received across the country after a comprehensive screening process. These grants are intended to support start-ups that deliver unique ideas that will usher in long-term improvement in society and the world. These grants have been offered under the aegis of #Parivartan, the umbrella program for the bank’s social initiatives. The criteria for evaluating start-ups were the potential impact they could deliver on the following parameters: sustainability of the idea, potential to scale up, how does it benefit the society and environment, uniqueness of the Project

Smita Bhagat, Country Head, Government & Institutional Business, e-commerce and start-ups, HDFC Bank, said,” Through the SmartUp programme, we are nurturing the entrepreneurial spirit of the start-up community. We are aware of start-ups developing innovative ways to bring about long-term societal change. Our respect and enthusiasm for start-ups working to make our world more resilient is reflected in these grants.”

Ashima Bhat, group head – CSR, Infrastructure and Finance, HDFC Bank, said” We are honoured to be a part of an inspiring group of start-ups dedicated to meaningful social change. It is also the focus of #Parivartan, our flagship CSR initiative. There are start-ups that are working to improve livelihood, skilling, and working with the challenged sections of society; bringing inclusive change, which is in line with our goal of giving back to the society we live in.”



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