Tag: HDFC

Economic recovery is underway but credit growth remains tepid: Deepak Parekh

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HDFC Ltd Chairman Deepak Parekh on Tuesday expressed confidence that the country’s macroeconomic fundamentals are strong and recovery is underway.

“Owing to the second wave, the Indian economy is likely to mirror a similar trend seen in 2020-21, where the first half of the financial year is weaker and the second half is significantly stronger,” Parekh said at the annual general meeting of HDFC Ltd.

However, while parameters such as foreign exchange reserves and capital markets are strong, he underlined that key laggard remains overall credit growth which continues to remain tepid.

Parekh also said the inherent demand for home loans continues to be strong and even in commercial real estate, most companies have not given up on their office space in the pandemic.

He also noted that there are segments of real estate with immense potential to grow.

“With the e-commerce boom, demand for real estate is coming from warehousing and fulfilment centres,” he said, adding that with the build-up of digital infrastructure, demand for data centres have increased.

The demand for housing has also continued to be strong after the easing of the national lockdown and was for both affordable housing and high-end properties.

“Asset quality has been challenging for non-individual loans at a systemic level. the corporation has always been prudent in identifying loans where there could be stress and has adequately provided for such loans,” Parekh further said.

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HDFC Bank cautious on retail biz, BFSI News, ET BFSI

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Mumbai: The second wave of the pandemic has turned HDFC Bank cautious with respect to retail loans. The bank’s overall retail loan book shrank from Rs 5.27 lakh crore at the end-March 2021 to Rs 5.23 lakh crore at the end-June. Retail loans fell with a drop in credit card outstandings, auto loans, two-wheeler loans and loans against securities.

According to HDFC Bank’s chief financial officer Srinivasan Vaidyanathan, credit card outstanding shrank to Rs 60,429 crore in end-June from Rs 64,674 crore in end-March because of a drop in revolving credit. He said that the focus was on the quality of credit and around three-fourths of the bank’s credit card customers have deposits that are on average five times the credit card outstanding. He was addressing analysts in a conference call after the bank’s results for the first quarter of the current fiscal.

Speaking in the same call, head (retail assets) Arvind Kapil said that the bank was now seeing buoyancy returning to the personal loan segment and expects good growth in future.

The bank, which is facing a freeze on issuing new cards, has completed an audit of its IT systems as required by the RBI and is now waiting to hear from the central bank. Even as it awaits the RBI’s nod for resuming card issuance, the bank is rapidly growing its card-acceptance business. Vaidyanathan said that the bank already has 2.3 million merchant-acceptance points and it has a 50% market share of merchants being on-boarded for card acceptance as against 40% last year.

HDFC Bank’s chief credit officer Jimmy Tata said that, during the quarter, things had not been the most orderly because of the second wave. “We were pretty much back to pre-Covid level until March, till the second wave hit us in April. We found our staff getting infected rapidly and we stopped going out on recovery calls. Most of the work was work-from-home. It is only in the month of June that we had the ability to start going out,” he said. In the second quarter, there has been a high level of vaccinations in the bank and staff have returned to the office for calling on borrowers.

According to Tata, the one product segment that has seen a non-Covid impact was diesel commercial vehicles (CVs), because they have not been able to pass on the sharp hike in fuel costs. He said that the bank was watching the portfolio as it would take two quarters for the price hike to be passed on. “We expect that by the festival season, things would have been brought back on an even keel, with cost increases passed on.”

On the cards business, Srinivasan said that HDFC Bank’s debit card issuance would not be hit because of the ban on Mastercard except for a couple of co-branded cards. He said that cards contribute between one-fourth to a third of the bank’s fee income in any quarter.



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Cashfree appoints Arun Tikoo as SVP of Business and Strategy, BFSI News, ET BFSI

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Cashfree, a digital payments and banking technology company, has appointed Arun Tikoo as the Senior Vice President of Business and Strategy.

With the new appointment, Cashfree plans to expand its products, merchants, partnerships, and alliances while strengthening the existing distribution network across industries. Arun will be responsible to oversee compliance, pricing, and operational setups of the new product launches.

Arun has over two decades of experience at financial institutions including SBI, Yes Bank, ICICI, and HDFC. He has onboarded startups across fintech, agritech, edutech, and e-commerce & aggregators.

Akash Sinha, CEO, and Co-Founder of, Cashfree said, “Arun Tikoo brings with him a wealth of traditional and digital banking experience. We are thrilled to have him on board. We are confident that Arun’s experience in the BFSI sector and his impressive network, built over 20 years, will propel Cashfree’s growth strategy. There are some exciting things in the pipeline at Cashfree and Arun’s expertise will be critical in helping us move swiftly in our goal of boosting digital payments in India and bringing more people into the financial ecosystem”.

The company aims to grow Cashfree’s footprint in international markets and partnerships with banks.

Arun Tikoo, SVP Business, and Strategy, Cashfree, said, “I am excited to be part of Cashfree at a pivotal growth period. Fintech is the future of the banking and payments industry. It is well-positioned to lead an overhaul of the banking industry in the next five years. As one of the fastest-growing fintech companies in India, Cashfree is poised to increase the industry’s digital footprint with its innovative offerings. My focus will be to create a clear product road map and drive Cashfree’s expansion into new geographies.”



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NHB imposes ₹4.75 lakh fine on HDFC

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The National Housing Bank has imposed a monetary penalty on Housing Development Finance Corporation Ltd (HDFC) of ₹4.75 lakh for non-compliance with certain provisions.

“…NHB has on July 5, 2021 imposed a monetary penalty of ₹4,75,000 plus GST on the Corporation for technical non-compliance with NHB circular NHB(ND)/DRS/PolNo.58/2013-14 dated November 18, 2013 and NHB(ND)/DRS/Policy Circular No.75/2016- 17 dated July 1, 2016,” HDFC said in a stock exchange filing on Tuesday.

The Corporation will be taking necessary steps to comply, it further said.

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Customer retention is a challenge for HFCs: Deepak Parekh

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HDFC Ltd Chairman Deepak Parekh has highlighted the challenge for housing finance companies to retain customers amidst low-interest rates being offered by several banks and increased loan amounts.

“It would be of great comfort for all HFCs to have this issue put to rest,” Parekh said in a letter to shareholders.

“Another niggling point for HFCs is retention of customers. Lenders are susceptible to losing their existing customers to other players who often lure them through lower interest rates or increased loan amounts. As there are no prepayment penalties on floating rate loans, a lender can take over a home loan rather effortlessly,” Parekh said in a letter to shareholders.

Balance transfers only shift assets from one player to another, he said, adding that it does not increase home loans or home ownership at a system level.

“Yet, this is par for the course in a competitive business landscape,” Parekh said, pointing out that onboarding a home loan customer takes a great deal of effort and entails costs as well.

Other regulatory issues

In his letter, which is a part of HDFC’s Annual Report 2020-21, Parekh also highlighted other regulatory issues but said these are his personal views.

Despite differences in interpreting regulations, Parekh said that non-banking financial companies, including HFCs,follow Indian Accounting Standards (IndAS), which is still not aligned with the prudential guidelines.

“This results in differences in opinions between the inspection teams, regulated entities and even the auditors,” he said, adding that it may be prudent to resolve these issues sooner than later.

Insurance loan

He also said that the insurance loan to a home loan customer should be considered as an integral component of a housing loan and be permitted to be classified accordingly.

“Currently, an insurance loan given to a home loan borrower is considered as a non-housing loan. Insurance is voluntary for a home loan borrower,” he said.

Parekh further said that the current regulatory framework might have the unintended consequence of penalising a HFC for maintaining excess liquidity.

“Larger amounts of liquidity are being held by HFCs out of abundant precaution,” he said, adding that a minor tweak which could exclude surplus liquid balances from total assets to arrive at prescribed limits would go a long way in helping HFCs.

Parekh also remained optimistic about the demand for home loans despite the resurgence of Covid infections.

“Despite the economy contracting 7.3 per cent in 2020-21, the demand for home loans surpassed all expectations. Going forward, the risks of recurring waves of infections may result in temporary set-backs, but the inherent demand for homes loans remains stronger than ever,” he said.

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ICICI Bank leads in credit card issuances

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Private sector lender ICICI Bank seems to be turning into the market leader in terms of acquiring credit card customers.

The bank has added over 8.15 lakh new credit card customers between January and April this year.

This coincides with the temporary halt on acquisition of credit card customers on HDFC Bank by the Reserve Bank of India in December last year.

According to the latest RBI data, ICICI Bank had 1.07 crore credit card customers by April end this year, adding 1.42 lakh customers over March.

The bank has the third largest credit card base and has been making additions on a monthly basis.

HDFC Bank continues to have the largest credit card customer base with 1.49 crore outstanding credit cards as on April 30, 2021.

But it has seen a decline of 3.8 lakh credit card customers since December 2020, when it had 1.53 crore outstanding cards.

State Bank of India has the second largest credit card base with 1.19 crore outstanding cards by April end this year. It has added 1.05 lakh new customers since December 2020.

Meanwhile, Citigroup which has announced plans to exit its consumer banking operations in India, has also registered a decline in its credit card base. It has 26.21 lakh credit cards outstanding as on April 30, 2021 versus 26.94 lakh as on December 31, 2020.

Private sector Axis Bank has 72.01 lakh credit cards in force by April end this year as against 68.72 lakh in December 2020.

However, with the economic uncertainty following the second Covid wave, analysts expect banks to have become more cautious in terms of credit card issuances.

“Given the challenges posed by Covid 2.0, we expect the spends, new sourcing, and business volumes to remain impacted in the near term. However, we believe that with Citi Bank’s exit from the credit cards business and domestic corporate loan cycle yet to pick up, credit cards will remain a growth avenue, especially for the major players such as SBI Cards, ICICI Bank further strengthening the position of such domestic players in this space,” said a report by Axis Securities last month.

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A sizzling rally lures HDFC Bank to do more equity deals

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A hot equity market in India is prompting HDFC Bank Ltd. to try to muscle in on the action as companies raise record levels of funding.

The government has flooded the market with money in response to one of the world’s worst outbreaks of coronavirus, pushing stocks to dizzying levels and helping companies to boost capital buffers. Despite being India’s most valuable lender, HDFC Bank so far hasn’t been able to exploit its strong balance sheet to make inroads into this competitive market.

“We will do whatever it takes to reach there – hire more people, grow more people from inside and even enter into partnerships,” Rakesh Singh, group head of investment banking, private banking, marketing and products at HDFC Bank, said in an interview. “As we build our distribution network a larger share of the equity capital market deals will come our way.”

Also read: Indian shares open lower ahead of GDP data

It may be easier said than done for a relatively late starter like HDFC Bank to grab a bigger share of the market as it grapples with uncertainty over its asset quality. The country’s second-largest lender will have to fight it out with veteran local players including ICICI Bank Ltd., Axis Bank Ltd. and State Bank of India.

HDFC Bank has lagged in recent years as it focused on its fast-growing core business of lending and deposits rather than investment banking. The Mumbai-based company ranked number 16 for overall equity deals business last year, and number 29 in 2019, according to data compiled by Bloomberg.

Also read: Markets may open flat as bulls likely to take a breather

“It’s a cut-throat market where big corporates prefer to work with dominant and well-established bankers with existing relationships who can offer them the best pricing,” said Siddharth Purohit, an analyst at SMC Global Securities Ltd. “Unless HDFC Bank offers something really attractive it will not be easy for them to grow this business quickly and get the big-ticket deals.”

India’s stocks have extended their climb, reflecting investor optimism that the economy will rebound strongly from devastation caused by the coronavirus. The benchmark index was up 0.7 per cent on Monday, close to its record high in February.

Companies raised ₹789 billion ($10.9 billion) so far this year through the equity markets, a 9.3 per cent increase from last year, according to data compiled by Bloomberg. That’s after an unprecedented ₹2.2 trillion of deals in 2020.

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SBI, HDFC Bank don’t want sensitive data made public, BFSI News, ET BFSI

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NEW DELHI: The two largest banks in the country — State Bank of India and HDFC Bank — moved the Supreme Court on Friday and sought a stay on the Reserve Bank of India’s directive to banks to provide financially sensitive data under the RTI Act, saying they feared that it could be detrimental to their business operations and compromise confidentiality of customer information

Though the direction was sought against RBI, it was aimed at the SC’s order that allowed divulging of such data.

Court earlier restrained RBI from disclosure under RTI Act

The SBI, through advocate Sanjay Kapur, said, “In view of the judgment in Jayantilal N Mistry case, the RBI is seeking disclosure of confidential and sensitive information of the applicant bank, including information of its employees and its customers, purportedly under the Right to Information Act, 2005, which are otherwise exempt under the provisions of Section 8 of said Act.”

Appearing for the SBI and HDFC, solicitor general Tushar Mehta and senior advocate Mukul Rohatgi told a bench of Justices L N Rao and Aniruddha Bose that divulging sensitive information like inspection reports/risk assessment reports/annual financial inspection reports of banks would render them vulnerable in the competitive banking sector to rivals, who could exploit the RTI Act to know the trade secrets and internal strengths of successful banks.

The court had earlier restrained the RBI from disclosing such reports under the RTI Act.

However, that interim order got washed away because of the SC’s April 28 order refusing the review the Jayantilal N Mistry judgment.



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Nifty hits all-time high as heavyweights HDFC twins, RIL lift D-Street, BFSI News, ET BFSI

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Domestic equity benchmarks began Friday’s session on a strong note with the Nifty50 benchmark scaling a record high amid strong buying interest in heavyweights such as HDFC twins, RIL and ICICI Bank.

The S&P BSE Sensex index rose as much as 361.83 points to touch 51,477.05 in the first few minutes of trade, and the broader NSE Nifty 50 benchmark climbed to a record high of 15,455.55, up 117.7 points from its previous close.

HDFC was the top performer in the Sensex universe, trading 1.25 per cent higher in early deals. HDFC Bank, IndusInd Bank, ICICI Bank, RIL and SBI were among other gainers.

On the other hand, Sun Pharma was the top laggard, down 3 per cent. Dr Reddy’s, M&M, Nestle and Bajaj Auto were among other blue-chip losers.

Analysts awaited more Q4 earnings from India Inc for cues. M&M, REC, Ipca Laboratories, Sundaram Finance, Max Healthcare and Glenmark Pharma are among the companies slated to report their financial results later in the day.

Equities in other Asian markets cheered in the early session in line with global markets as strong US economic data solidified hopes of continuing recovery. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.40 per cent. Japan’s Nikkei 225 soared 1.95 per cent, Hong Kong’s Hang Seng rose 0.46 per cent and South Korea’s Kospi 0.42 per cent.

Overnight on Wall Street, equity benchmarks finished higher following more signals that the economy is continuing to recover. Investors were encouraged to see that weekly unemployment claims fell to another pandemic low. The Dow Jones industrial average rose 0.41 per cent, the S&P 500 0.12 per cent and the Nasdaq Composite ended flat.

In the oil market, prices pushed higher supported by firm US economic data and expectations of a strong rebound in global fuel demand in the third quarter. Concerns eased about the impact of any return of Iranian supplies. Brent crude futures for July gained 0.2 per cent to $69.62 per barrel.



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HDFC net jumps 42% on higher interest income

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The cost to income ratio stood at 7.7%, compared to 9.0% in the same period last year.

Mortgage lender Housing Development Finance Corporation (HDFC) on Friday reported a 42% year-on-year (y-o-y) jump in its net profit to Rs 3,180 crore for the quarter ended March 2021 on the back of higher net interest income (NII).

The NII grew 14% y-o-y to Rs 4,065 crore. The bottom line grew despite a 19% y-o-y rise in provisions to Rs 13,025 crore. The lender has provided on a conservative basis against regulatory requirement to carry a total provision of Rs 5,491 crore during Q4FY21.

Keki Mistry, vice chairman and chief executive officer, said, “The second wave and partial lockdowns have brought new challenges, but given digitalisation of our operations as well as learnings from the past year we are confident that we are well equipped to face the year ahead.” The demand for home loans continued to remain strong owing to low interest rates, softer property prices, concessional stamp duty rates in certain states and continued fiscal incentives on home loans, Mistry said.

The net interest margin (NIM) for the quarter increased 10 basis points (bps) on a sequential as well as y-o-y basis to 3.5%. The spread on the individual loan book was 1.93% and on the non-individual book was 3.22%.

The collection efficiency for individual loans in March 2021 stood at 98.0% compared to 96.3% in September 2020.

The individual loan disbursements grew at 60% over the corresponding quarter of the previous year. March 2021 witnessed the highest levels in terms individual receipts, approvals and disbursements, according to the lender. Similarly, the growth in home loans was seen in both the affordable housing segment as well as high-end properties.

The asset quality saw some pressure during the March quarter. Gross non-performing loans ratio increased 7 bps to 1.98%, compared to gross non-performing loans of 1.91% in the December quarter on a proforma basis. Lenders had reported NPAs on a proforma basis during the December quarter due to a standstill from apex court on declaring NPAs.

The cost to income ratio stood at 7.7%, compared to 9.0% in the same period last year. “The reduction in the cost to income ratio during the year is attributed to Covid-19-induced lockdowns and restrictions, thus leading to lower expenses incurred on travel and conveyance, electricity charges and digitalisation initiatives have reduced expenses such as printing, stationary and postage charges,” HDFC said.

The capital adequacy ratio of the lender stood at 22.2% at the end of the March quarter, compared to the minimum regulatory requirement of 14%.

HDFC’s board approved dividend worth Rs 23/share with a face value of Rs 2. The board also approved fund-raising through non-convertible debentures (NCDs) or any hybrid instrument worth up to Rs 1.25 lakh crore on a private placement basis. Meanwhile, Keki Mistry, vice chairman and managing director of the home financier, was reappointed for another three years, subject to shareholders’ approval.

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