Exclusive Interview | At HDFC Bank we are a play on the GDP. We don't chase a particular mix, says Kaizad M Bharucha, Executive Director

Yes, the Covid pandemic has been around for a while now and it has been a challenging period for all stakeholders. But then all these things have to eventually have an endpoint. Going by the experience of other countries as well as the vaccination coverage domestically, I am hopeful about the impact of the third wave being muted. Even the second wave did not result in complete lockdowns and the economy was impacted far less.

Is this going to be the new normal for the banking sector?

As far as the banking sector in general and HDFC Bank in particular, digital adoption took a leap. This happened not only at the retail level but also at the corporate level. So banks which provided a seamless experience to customers were able to reap the benefits.  So that certainly was a welcome move in terms of quicker adoption and that is something that will stay for years to come as it brings in a better customer experience. It is more efficient, it processes transactions seamlessly and there are cost benefits for the participants involved.

How did Covid impact the repayment behaviour of your corporate clients, and is wholesale asset quality a big concern, in the second/third waves?

Given the quality of our corporate clients, I think they were well-positioned to deal with the challenges that were thrown up by COVID and these challenges were there mainly on the supply side. Most of them were able to activate their contingency plans and adjust to the new operating environment. Yes with some level of disruption but I think they managed well. They also utilised the time to introspect and reduce their cost structures. We saw this playing out as the first wave of COVID ended and economic activity resumed. That was reflected in the good operating margins of the companies before the second wave really set in.

So I think repayment behaviour was by and large good and it showed the resilience of the borrowers. On the corporate side, I don't think we have had any concerns about our asset quality.

Could you give us a sense of where do you see the stress mostly in terms of restructuring requests?

Well at our end on the corporate side, I think we have had minimum requests for restructuring. Given the low level of requests received on the corporate side, naturally, the stress also has been minimal.

Is there a rethinking post-COVID as far as loan mix vs corporate and retail loans?

I think we have said it a number of times before and we will say it even now, at HDFC Bank we are a play on the GDP. We don't chase a particular mix. Where we find that there is growth and there is an opportunity and it meets our credit standards, we will certainly participate in those areas. So it is not a pre-defined mix. It is more a case of being well represented in the corporate as well as retail segments. So it is not a particular number that we target.

What are the focus areas going ahead in wholesale/Corporate banking?

I think when we look at corporate banking, one of the things we have as a bank is the ability to offer an entire gamut of products and services. This helps us to identify opportunities based on customer requirements. Further, we can cater not only to the corporates but also their supply chain. We are in a position to offer an entire range of solutions from working capital loans, term loans, transaction banking, trade and forex services. Now another sector that can emerge as a growth engine for corporate banking is infrastructure. The government push in this sector means that there are good opportunities available in this space. I think we have seen it in roads, telecom, fibres. We have seen it in the energy, pharma, commodities space. So there have been several sectors that have provided the current set of growth opportunities. Given that our portfolio is well-diversified and also our comprehensive product/service basket, we believe that we are well-positioned to cater to their requirements.

You recently said HDFC bank will grow its corporate book selectively. Does this mean shrinking the existing book and shifting more to retail?

No. Based on our interactions in the market with our customers, we get the strong feeling that growth is already being witnessed in certain sectors. The idea is to focus more on these sectors to grow the corporate book rather than spread the portfolio thin. That is what I mean by selective growth and not shrinking or rebalancing the book. To put matters in perspective our corporate lending grew by about 10 per cent year on year in the June quarter while the overall system more or less stayed where it was.  And in about four years it has grown from 1 lakh crore to about 3.5 lakh crore.

What type of companies do you like most for corporate loans?

Companies that are well established, have a good track record, amongst the top end of the players, who are growth-oriented, whose management has demonstrated prudence in capturing growth and at the same time not over-leveraging themselves. These are companies that would typically have a high quality of standing and rating and they therefore would be companies that we would certainly most like to associate with.

Are public sector banks getting more aggressive in wholesale/corporate banking?

Well, they have always been strong competitors and participants with regard to the public sector space. We continue to see their participation in not only the public sector but also in non-public sector space.

Having said that I would say a few of them have become more aggressive, on their loan pricing but that is part of the competition, and we have charted our own approach and strategy which has played out well over the years and we will continue with what we think will be appropriate in ensuring that we have our rightful market share in the corporate space.  This is what has helped us to grow while retaining asset quality.

Are the new crop of fintechs a threat or opportunity for legacy banks?

The short answer is that I think they are an opportunity. Fintechs will have a role to play and banks would selectively associate with some of them. This would be more appropriate rather than reinvent the wheel themselves. So I think they are not a threat but certainly an opportunity to collaborate and grow business in the financial services space. And fintechs too need banks and cannot replace them. So I think a collaborative approach where it adds up for both of them would be the way forward.

What is the strategy for expansion? How far will the brick and mortar model stay?

This question is asked very often.  I think the fact is that both will coexist and most certainly in the Indian context.  At least that is how I see it over the next several years. Some banks will invest more than others in brick and mortar branches. Each Bank will have to figure out the exact mix based on the profile of both existing and future customers. But there is no getting away from the fact that digitisation has come to stay.