In a recent call with investors, Jagdishan had said that HDFC Bank plans to expand its SME banking platform, which now accounts for 20 percent of its loan book, as the key growth driver in the next three to five years.
The country's largest private sector lender, HDFC Bank has identified corporate banking, lending to micro, small and medium enterprises (MSME), government banking, retail assets and payments as key focus areas going ahead and the growth strategy will be aided by digital channels, the bank’s MD & CEO said in the integrated annual report for 2020-21.
“We have clearly identified our growth engines: Corporate Banking, Commercial Banking (MSME) and Rural, Government and Institutional Banking, Private Banking, Retail Assets and Payments to be driven by our delivery channels of Branch Banking, Tele-Sales/Service/Relationship and Digital Marketing,” Jagdishan said in a message included as part of the report.
These growth engines would be powered by HDFC Bank’s technology and digital platforms. They will also account for the bulk of the bank’s future investments and can be broadly classified as business verticals and delivery channels, Jagdishan said.
Jagdishan said the bank’s strategy will have the ability to adapt and evolve without losing the core. “We are building upon our stated strategy of expanding our distribution footprint leveraging the Branch Channel and Virtual Relationship Channel with the addition of Digital Marketing as a key channel,” Jagdishan said. This will enable the bank to capture the growth potential in both urban and rural India as also different consumer segments, such as the tech-savvy and millennials, going forward.
While HDFC Bank continues to focus on the corporate cluster and government business to increase penetration, it has created a new business segment of commercial (MSME) and rural banking to capture the next wave of growth. “We will continue to strengthen our leadership position in the payments business and retail assets business and have added Wealth Management and Private Banking as a core focus area for us,” Jagdishan said in the report.
In a recent call with investors, Jagdishan had said that HDFC Bank plans to expand its SME banking platform, which now accounts for 20 percent of its loan book, as the key growth driver in the next three to five years. “The recent changes in the management structure were aimed to facilitate a far more focussed approach towards execution here... Bank is cognisant of the asset quality risks associated with this segment and hence will keep underwriting and collection teams tighter,” investment bank Jefferies said in a report dated June 10.
Jagdishan further added that while the bank had taken a cautious view on the impact of COVID on its staff over the past couple of months, the falling infection rates and vaccination are supporting the opening-up of the bank. “On the client side, the bank is largely comfortable as (1) 85 percent of retail clients work with AA and above rated corporates where job losses have been low, (2) SMEs were better prepared than in the past, and (3) larger corps. have better liquidity in their balance sheet,” Jefferies said.
Jagdishan said in the integrated annual report that all the core business areas would be supported by further strengthening HDFC Bank’s foundational capability in the technology and digital domains. The lender’s subsidiaries help it fulfill consumer needs for holistic financial solutions and the bank will continue to invest in them, Jagdishan added.