Shared long-term growth strategy with RBI, waiting for inputs, says HDFC Bank

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.

HDFC Bank, the country’s largest private bank by assets, said on June 30 it has shared its short to long-term growth strategy with the Reserve Bank of India (RBI) and was waiting to hear from the regulator.

The RBI in December 2020 barred HDFC Bank from new digital launches and issuing new credit cards after repeated outages hit the bank’s digital channels. The RBI has subsequently conducted an audit of the IT infrastructure of the bank. The embargo is yet to be lifted.

“We are constantly in discussions and talks with RBI. They had indicated areas in which they would want us to make changes in processes, investments in technology, etc. We’ve been through (this) in a very interactive manner in the last six months with the auditors appointed by the RBI,” said Parag Rao, Group Head–Payments, Consumer Finance, Digital Banking & IT, HDFC Bank.

The bank had submitted to the RBI its short, mid our long-term strategies with the single "goal of saying that HDFC Bank will continue to grow and is ambitious and aggressive about the segments where we are (present)”, Rao added.

In the last six months, the bank worked on strengthening its infrastructure and competency to match its growth ambition. “We are awaiting the comments of RBI and, like I said, we are hopeful and confident that RBI will be satisfied with the kind of changes we’ve shown immediately and in the short term,” Rao said.

The private lender has in the last six months lost market share in the issuance of incremental credit cards, even as it has been able to hold on to its leading share in spends, Rao said.

The bank is preparing itself to ensure that it takes back the pole position in terms of cards in force and also increases its spend market share once the embargo is lifted.

The bank acquired a “significant number” of customers on the liabilities and assets sides. The strategy to target 75-80 percent of internal customers for the card base would continue, Rao said. “We have pre-approved them, we have seen six months of behaviour of these customers on these products. So we’ve got all of that ready,” Rao said, outlining the levers that would drive the bank’s ability to recoup card market share.