Kaizad Bharucha, Executive Director at HDFC Bank said that the bank looks at the corporate before lending and his team visits and checks the projects based on the data and information shared by them
As the banking industry is wrestling high non-performing assets (NPAs), the most untouched lender HDFC Bank’s magic wand seems to be its high degree and frequency of engagement with its clients to pick early warning signals.
Over the last two years, while most banks, including large public and private sector, have witnessed a higher level of NPAs in the range of 5-15 percent, HDFC Bank has remained shielded with its NPAs at 1.24 percent as on June end.
Kaizad Bharucha, Executive Director at HDFC Bank, which is also the second largest private bank in India, said: “We engage with our client at a much higher degree and frequency and that is a part of the entire delivery mechanism which helps us deal with the client to not only resolve banking pain points, add value or bring another level of technology or digitisation but also allows us to pick up early warning signs. That is the architecture that runs across the wholesale banking space.”
Bharucha is a veteran banker, who joined HDFC Bank in 1995 from the State Bank of India (SBI) Commercial and International Bank, and now heads the wholesale banking team as ED for the past five years since December 2013.
Under Bharucha, the wholesale banking book has remained consistent in its share of total loans accounting for 45-47 percent of its total loan book. The book has increased from Rs 1.36 lakh crore in December 2013 to Rs 2.78 lakh crore as on June-end 2017. The retail to wholesale mix stands at 53:47.
In the first quarter of FY18 from April to June this year, the wholesale banking growth was at 24.8 percent.
“There are certain things that have made this bank successful across businesses. One of them is prudence. When we look at growth, we take a look at the Indian economy and the composition of GDP. Our exposure to various sectors will broadly mirror that. We will not succumb to the latest fad. We were selective and used prudence in lending…We looked at the input and output risks to see what value the project provided, Bharucha said to the banking reporters in a rare interaction along with his team.
Explaining HDFC Bank’s stance on most banks’ lending to the much-glorified infrastructure space, he said in the case of the power sector, basics like fuel linkages and power purchase agreements were not in place. “We took a conscious decision to limit our exposure to the infrastructure sector and at that time it looked like an opportunity lost. Today, we are being hailed as visionaries. It is simply doing the basics right.”
Bharucha said that the bank looks at the corporate before lending and his team visits and checks the projects based on the data and information shared by them.
Given the caution, the term financing has increased from 27-28 percent last year to 30 percent this year, constituting 30 percent of its total wholesale book. The rest of the loans are towards working capital and refinancing.
K Balasubramanian, group head, corporate banking, HDFC Bank said, “Ours is a client-centric approach to make tailor-made products to meet their requirements. This has helped us gain market share. In the next 12-18 months, we would continue to gain market share with the same strategy. The fundamental change is that digitisation and technology are playing a key role as an enabler and differentiator.”
Sensing an opportunity from the NPA trouble within public sector banks, HDFC bank aims to grow its term financing and though the private investments have not picked up as expected, Bharucha said it has provided a lot of refinancing opportunities where the implementation and project risk is done away with.
He added that at present, the roads, power transmission, and renewable sector look promising and HDFC Bank will lend based on their evaluation and comfort, largely in the refinancing space and less as project loans.