Download - HDFC Bank Strategy
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Submitted By-
Aditya Aggarwal
Aditya Narayanan
Anand ChandranAnkita Kunwar
Kevin Abraham
Pulkit Kabra
Saket Deepak
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About HDFC
Housing Development Finance Corporation Limited, more popularly
known as HDFC Bank Ltd, was established in the year 1994, as a part of the
liberalization of the Indian Banking Industry by Reserve Bank of India (RBI).
It was one of the first banks to receive an 'in principle' approval from RBI,
for setting up a bank in the private sector
The bank was incorporated with the name 'HDFC Bank Limited', with its
registered office in Mumbai. The following year, it started its operations as
a Scheduled Commercial Bank. Today, the bank boasts 1412 branches and
over 3275 ATMs across India
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History Of HDFC Bank
1994
The Bank was Incorporated on 30th August. A new private sector Bank
promoted by housing Development Corporation Ltd
The bank is the first of its kind to receive an in-principle approval from the
RBI for establishment of a bank in the private sector
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History Of HDFC Bank
1995
The Bank opened its first branch in Ramon House at Churchgate, Mumbai
on January 16th
1996
HDFC Bank set up a state-of-the-art dealing room to handle all
transactions possible in Indian financial markets
The Certificates of Deposits were awarded a PP1+ rating
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History Of HDFC Bank
1997
HDFC installed state-of-the-art systems to facilitate inter-connectivity
between branches and link up with on line system
HDFC Bank, planned to set up an all-India on-line automated teller
machine (ATM) network
Proposed to launch tele-banking for the first time in June
Becomes the first private sector bank to conclude a structured interest
rate option deal
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History Of HDFC Bank
1997
HDFC Bank entered into strategic alliances with 10 overseas banks to
provide customers with a wide range of derivatives including interest rate
and foreign currency swaps
Introduced ATMs that converse in a regional language
Introduced the Freedom Account for the average retail customer
Launched an account across India that seeks to free depositors from
minimum balance requirement, for the first time in the country
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History Of HDFC Bank
1998
Signs an agreement with the National Stock Exchange (NSE) which will give
it a second charge over the brokers deposit for providing loan against
share facility to NSE brokers
Becomes the first bank in India to link up its ATM network with all the
three major payment systems world-wide
Ties up with Master Card and Visa
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History Of HDFC Bank
1998
First bank in the Asia-Pacific region to connect the American Express
(Amex) payment system
Sony India Ltd (SIL) joined hands with HDFC Bank to work out an
innovative car finance package
Tied up with BPL Ltd to offer Internet-enabled supply-chain management
and business-to-consumer (B2C) e-commerce services to corporates
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History Of HDFC Bank
1998
Hutchison Max Telecom and HDFC Bank introduced the country's first-ever
mobile-banking services
2000
Become the first bank in the country to offer wireless application protocol
(WAP) services to customers
Tied up with financial portals, e-brokerages and the National Stock
Exchange to enable broker payments for e-broking ventures
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History Of HDFC Bank
2000
Launched its first B2C payment gateway which allows Visa and MasterCard
credit card-holders to do transaction online and realtime
Launched `eInstant Car Loans' a new scheme for offering customers a
range of net-enabled loan products
Launched depository services on the net
Tied up with portal brainvisa.com to retail education loans to students
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History Of HDFC Bank
2001
The Bank has launched the international Maestro debit card in association
with Master Card
Launches its credit card in June through link-ups with MasterCard and Visa
Entered into a strategic tie-up with Tally Solutions Pvt. Ltd. to offer online
real time accounting services to SMEs
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History Of HDFC Bank
2002
HDFC Bank opens first overseas representative office
Unveils Gold and Silver Cards
Launched new products to its wealth management programme to increase
its customer base. It introduced a non-interactive product named Financial
Planner, which would be available for all its customers for an annual fee
starting from Rs 10,000
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History Of HDFC Bank
2003
Unveils resident foreign currency account
Unveils co-branded credit card with e-Seva
HDFC Bank, IRCTC in tie up for online railway booking
Introduces 'HDFC Bank Health Plus Credit Card
Launches India's first mobile payment solution
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History Of HDFC Bank
2005
Launches loyalty rewards programme for its debit and credit cardholders
under the name InstaWonderz
Unveils credit card for farmers
2006
Osim to join hands with HDFC Bank for consumer loans
Inaugurates VbV facility for online shopping
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History Of HDFC Bank
2007
Signed an agreement with Tata Pipes to offer credit facilities to farmers
across the country
2008
HDFC Bank and Centurion Bank of Punjab merger at share swap ratio of
1:29
Launches Indias First Online Market Linkage Programme For Self Help
Groups
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History Of HDFC Bank
2009
HDFC Bank launches Meritus Scholarship Programme
The Asian Banker declares HDFC Bank the Best Retail Bank
2010
Decided to pay variable interest rate on recurring deposits
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Amalgamations
In 2002, HDFC Bank witnessed its merger with Times Bank Limited (a
private sector bank promoted by Bennett, Coleman & Co. / Times Group).
With this, HDFC and Times became the first two private banks in the New
Generation Private Sector Banks to have gone through a merger. In 2008,
RBI approved the amalgamation of Centurion Bank of Punjab with HDFCBank. With this, the Deposits of the merged entity became Rs. 1,22,000
crore, while the Advances were Rs. 89,000 crore and Balance Sheet size
was Rs 163000 crore
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Capital Structure
At present, HDFC Bank boasts of an authorized capital of Rs 550 crore
(Rs5.5 billion), of this the paid-up amount is Rs 424.6 crore (Rs.4.2 billion).
In terms of equity share, the HDFC Group holds 19.4%. Foreign
Institutional Investors (FIIs) have around 28% of the equity and about
17.6% is held by the ADS Depository (in respect of the bank's American
Depository Shares (ADS) Issue). The bank has about 570,000 shareholders.Its shares find a listing on the Stock Exchange, Mumbai and National Stock
Exchange, while its American Depository Shares are listed on the New York
Stock Exchange (NYSE), under the symbol 'HDB'
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Awards
CNBC TV18's Best Bank & Financial Institution Awards
Best Bank
Dun & Bradstreet Banking Awards 2011 - Best Private Sector Bank -
SME Financing ISACA 2011 award for IT Governance - Best practices in IT
Governance and IT Security
Euromoney Awards for Excellence 2011 - Best Bank in India
FINANCE ASIA Country Awards 2011: India - Best Bank, Best Cash
Management Bank, Best Trade Finance Bank Asian Banker - Strongest Bank in Asia Pacific
Bloomberg UTV's Financial Leadership Awards 2011 - Best Bank
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Awards
IBA Banking Technology Awards 2010
Winner
1) Technology Bank of the Year
2) Best Online Bank3) Best Customer Initiative
4) Best Use of Business Intelligence
5) Best Risk Management System
IDC FIIA Awards 2011 - Excellence in Customer Experience
The Banker and PWM 2010 Global Private Banking Awards-Best Private
Bank in India
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Awards
Forbes Asia- Fab 50 Companies - 5th year in a row
NDTV Business Leadership Awards 2010- Best Private Sector Bank
Business Today Best Employer Survey- Listed in top 10 Best Employers in
the country
Asian Banker Excellence Awards 2010
Best Retail Bank in India
Excellence in Automobile Lending
Best M&A Integration
Technology Implementation
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HDFC Credit Card Vs Debit Card
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HDFC Credit Card Vs Debit Card
For HDFC, one of the largest private sector banks of India, the number of
credit cards and debit cards have been comparable, unlike other banks
such as ICICI and SBI, whose credit card debit card deficit have been
significant
Over a span of 2 years, the number of debit cards have gone up by 71.85%
to 4.36 million by the end of March 2011, whereas the number of credit
cards have increased by 19.53 % to 5.22 million. On comparing HDFC with
ICICI and SBI, we discovered two interesting patterns: HDFC is the only
bank among the three whose credit cards outnumber debit cards.
Secondly, the absolute numbers of cards are considerably fewer than that
of ICICI and SBI
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Most Social Engagement Bank
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Stock prices
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Facts
Despite macroeconomic headwinds, the bank was able to maintain its net
non-provisioning assets at 0.2 per cent on a sequential basis. At 81.3 per
cent, the provision coverage ratio was also healthy
It is better placed than many peers to maintain its asset quality. However,
it has significant exposure (around 15 per cent) to the small and medium
enterprises (SME) segment
HDFC Banks loan growth stood at a healthy 25.6 per cent, up 560 basis
points over the June quarter. According to the management, while retail
loan growth remained on track, growth in the corporate lending segment
was mainly led by working capital loans and ongoing loans. The loan book
was boosted by 38-40 per cent year-on-year growth in business banking
loans to SMEs, commercial vehicle, construction equipment and home
segments
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Facts
Though the deposit growth has nearly halved from 30.4 per cent in the
year-ago quarter, at 18.1 per cent, it was higher than the 15.4 per cent
seen in the June quarter, and in line with the managementsaim
Despite the tough macroeconomic environment, at 4.1 per cent, the bankwas able to control its net interest margin compression to 10 basis points.
This is within the managementstarget range of 3.9-4.2 per cent
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Porters Forces
Threat of competitorsLarge number of banks
Strong exit barriers
Low switching costs
Threat of substitutesDeposits in posts
Non Banking financial
sector growing rapidly
Bargaining power of
consumer
Numerous alternatives
Low switching costs
Increasing consumer
awareness
Threat of new entrantsProduct differentiation
very difficult
Entry barriers
Bargaining power of
suppliers
RBI rules and
regulations
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Porters Forces
Threat of Competitors
Large number of banks
There are so many banks competing against each other for the same
set of people
Strong exit barriers
There are a lot of customers who are at stake and numerous legal
obligations which need to be fulfilled
Low switching cost
Costumers switching cost is very low, they can easily switch from one
bank to another bank
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Porters Forces
Bargaining power of suppliers
RBI rules and regulations
RBI lays down rules and regulations according which the banks are
governed
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Porters Forces
Bargaining power of consumers
Numerous Alternatives
There are numerous banks competing against each other for the same
set of people
Low switching cost
Costumers switching cost is very low, they can easily switch from one
bank to another bank
Increasing consumer awarenessWith the increasing amount of information available to the consumer,
banks have to be more competitive and customer friendly to serve
them. If not, the consumer can easily switch to their competitors
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Porters Forces
Threat of new entrants
Product differentiation very difficult
Services provided by banks are not highly differentiated which
increases the bargaining power of consumers
Entry Barriers
Reserve Bank of India has laid out a stagnant rules and regulation for
new entrant in Banking Industry
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Porters Forces
Threat of substitutes
Non-Banking financial sector
These are financial resources outside the traditional banking system
which has witnessed a tremendous growth in recent years in India
NBFC is a close substitute of banking in respect of raising funds.
Deposit in Posts
Post office provides services like fixed deposits, savings account,
recurring account etc. The interest rate
of saving account is higher than private banks. Sinceit is fully secured by the government, people
who do not want to take risks look at post office saving as a good
substitute
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Industry Size
Indias GDP (USD Billion PPP) 4057Share of Services (% of GDP)55.2
Banking and Insurance Size (USD Billion)395.96
Source:http://www.interlinkre.com
0.18%
9.40%1.81% 2.53%
2.74%
9.76%
26.94%20.61%
14.67%
11.36%
00 0
0
Composition of Service Sector
Storage
Transport
Railways
Hotels & Rest.
Commu.
Banking & Insurance
Trade
Real Estate
Other Services
Public Admin. & Defence
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Growth
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2005-06 2006-07 2007-08 2008-09 2009-10
15.90%
20.60%
16.70%
14%
11.30%
Annual growth in Banking and Insurance sector whichforms a part of Indias services
Annual Growth
Source:http://www.interlinkre.com
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Segmental Analysis
Reserve Bank ofIndia
Scheduled
Commercial Bank
Non-Scheduled
Commercial Bank
Local Area BankCo-operative BankCommercial Bank
Foreign24 Urban Bank State Bank
Private Sector22
Regional rural6
Public Sector26
New7 Old15SBI Group7 Nationalized19
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Segmental Analysis
PSU Banks
Government of India holds majority of stakes in PSU banks. They are the
largest category in the Indian banking system
Regional Rural Banks
Established during 1967-1987, they are jointly owned by the Central
government, State Government and a sponsoring public sector commercialbank
Private Sector Banks
They have major portion of the share capital with private individuals and
corporates. Non-nationalized are old private banks and nationalized in1993 are termed as new private banks
Foreign Banks
They have their head offices in a foreign country but operate their
branches in India
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Segmental Analysis
0
10000
20000
30000
40000
50000
2010 2011
3925744901
1311117712
4741 7719
Public Sector Banks
Private Sector Banks
Foreign Banks
Profit during the year
0.00%
50.00%
100.00%
2011
14.38%
35.09%
62.81% Public Sector Banks
Private Sector Banks
Foreign Banks
Growth in profit during
the year
Amount in Crore Rupees
Source:http://rbidocs.rbi.org.in
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Basis of CompetitionThe following factors have influenced the increase in competition in the
banking sector
Profitability - Higher profitability compared to the past or international
standards. This attracts new entrants which increases the competition in
the industry
Technological ChangesThis enable quicker and more efficient serviceProduct Innovations Features such as home banking, ATMs etc are
making the industry fiercely competitive
Entry/Exit Norms Though regulatory barriers have been eased,
desirable barriers exist in the form of capital and other requirements
Increasing consumer awareness - consumers of banking services aregetting increasingly agile, enlightened, cost and quality conscious. They are
already forcing the pace of competition on price, product and quality
products
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Critical Success Factors
There are 5 critical success factors applicable in the banking sector
IT and New technology Technology has the potential to change
approached to marketing, advertising, designing, pricing and distributing
financial products and services and cost savings in
the form of an electronic, self-service medium. Technology holds the
key to the future success of Indian Banks
Features like internet banking, anytime, anywhere banking, tele-banking,
remote access, multi city chequing facilities etc have become a key
differentiator
Low employee cost Focusing on increasing employee efficiency by
adopting people centric policies. There are various methods that are used
to achieve this.
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Critical Success Factors
Managing NPAs NPAs have been on of the major problems for Indianbanks. However due to the active steps taken by the regulatory authorities
and the banks, the gross NPA level has been reduced. To ensure long-term
profitability, banks have to manage NPAs effectively by adopting the many
techniques
Diversified Products Diversification in the product set gives the
customer a wider variety of choices which enhances the banks competitive
edge.
Innovation/New product is a key driver of growth that surprises and
delights the customer with new, differentiated and relevant benefits
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Demand Drivers
High Economic Growth
Increase in purchasing
power
Sectors showing
growth
Retail Infrastructure Telecom Rural Markets Exports/Imports
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Demand Drivers
RetailIncrease in demand for housing, car, personal loans etc
InfrastructureIncrease in this
Telecom 3G and broadband spectrum auction have increased credit
demand
Rural Markets As the economy grows there will be more penetration
of private banks in rural areas
Exports/ ImportsAn increase in the export and imports would directly
increase the business of banks through their transactions, loans, bills etc
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Key Events
Main mergers and acquisitions in the Indian banking sector
HDFC Bank acquires Centurion Bank of Punjab (May '08)
Standard Chartered acquires ANZ Grindlays Bank (November '00)
Bank of Baroda acquires South Gujarat Local Area Bank Ltd (June '04)
ICICI Bank acquires Bank of Madura (March '01)
Oriental Bank of Commerce acquires Global Trust Bank Ltd (August '04)
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Regulations
Banks in India are governed by the Reserve Bank of India.
Banking Regulation Act, 1949
As per Section 5(c) of Banking Regulation Act, 1949 a "Banking Company"
means any company which transacts the business of banking in India.
Explanation:Any company which is engaged in the manufacture of goods
or carries on any trade and which accepts the deposits of money from
public merely for the purpose of financing its business as such
manufacturer or trader shall not be deemed to transact the business of
banking within the meaning of this clause.
As per Section 5(b) of Banking Regulation Act, 1949 , banking means the
accepting, for the purpose of lending or investment, of deposits of money
from the public, repayable on demand or otherwise, and withdrawable by
cheque, draft, order or otherwise.
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Regulations
Banking Regulation Act, 1949(continued)As per Section 5(d) of Banking Regulation Act, 1949 , company means any
company as defined in Section 3 of the Companies Act, 1956 and includes
a foreign company within the meaning of Section 591 of that Act.
As per section 51 of Banking Regulation Act, 1949 , certain provisions of
the Banking Regulation Act are also applicable to the State Bank of India ,
any corresponding new bank, a regional rural bank and any subsidiary
bank. "Corresponding new bank" has been defined under clause(ee)of
section 2 of the DICGC Act to mean a corresponding new bank constituted
under the Banking Companies (Acquisition and Transfer of Undertakings )
Acts of 1970 or 1980.
Source: http://fiuindia.gov.in
http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/ -
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Competitor Analysis
Strategies to enhance revenue
Efficient delivery of products and services can strengthen customer
relationship which will reduce operational costs.
Banks are automating routine transaction and redesigning branches to
suit local preferences for products , services and pricing.
Banks are also adding customer facing functions that are specifically
designed for their business.
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Financial Analysis Deposits
(Rs. Crore)
Public Sector
Banks, 4372985
Private Sector
Banks, 1002759
Foreign Banks,
240689
Source-
http://www.rbi.org.in/home.aspx
f ff k (
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Deposits of Different Banks (Rs.
Crore)1245862
225602 208586 189237
0
200000
400000
600000
800000
1000000
1200000
1400000
Deposits
SBI & Associates ICICI HDFC AXIS
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CAR of Different Banks (%)
11.98%
19.50%
16.20%
12.65%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
CAR
SBI & Associates ICICI HDFC AXIS
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BUSINESS MODEL
B i St t
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Business Strategy Increase the market share in India
Expand the product range and the customers
Improve the quality of customer service
Innovate on the product and service range to attract more customers and
address the existing inefficiencies
Maintain a disciplined credit risk management
Reduce banks cost of funds
HDFCs diverse loan portfolio along with superior lending practices de-risksits business model
Lower operating costs along with stable margins and high asset qualityensures sustainable profitability
h l h
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Business Philosophy
Based on 4Core Values
OperationalExcellence
CustomerFocus
ProductLeadership
People
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Improved Technology Adaptation
HDFC adopts the latest technology to provide the best for its customers
ATM facilities increased in number
Net banking, Phone banking etc. introduced and promoted
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Retail Banking Products
Loan products
o Auto loans, loans against securities, personal loans, credit cards, home
loans, commercial vehicle finance etc.
Depository productso Savings, Current, Fixed deposits
Other products/services
o Debit cards, mutual fund sales, insurance sales, NRI services, bill
payment services
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Retail
Retail mortgage accounts for around 2/3rds of the total loan
Majority is of individual borrowersdefault rates are minimal
Majority is for middle class, salaried employees; greater focus in Tier 2 and3 citiesensures diversification of the retail portfolio
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Wholesale Banking Products
CommercialBanking
Working capital, term loans, bill collection, Forex and Derivatives,
Letters of Credit, Guarantees
Transactional Banking
Cash management, custodial services, clearing bank services, tax
collections, banker to public issues
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Wholesale
HDFC is a financier to real estate developersincreased chance ofdefaults
Stringent norms like low loan-to-value(LTV) ratio of less than 65%
[proportion of loan value to property value]
Funding highly rated corporate
Loans for acquisition of property in IT parks and industrial zones
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HDFC Services
43%
40%
14%
2% 1%
2001Branches
ATMs
Phone
BankingInternet
Mobile
17%
45%12%
25%
1%
2008
Branches
ATMs
Phone Banking
Internet
Mobile
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SEGEMENTAL PRESENCE of HDFC
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Key Segments
Wholesale
BankingServices
RetailBankingServices
Treasury
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ASSOCIATED COMPANIES
HDFC BankHDFC Asset
ManagementCompany Ltd
HDFC Standard LifeInsurance
Company LimitedHDFC Sales
HDFC ERGOGeneral Insurance
Company ltd
HDFC Trustee
Company Ltd.
HDFC Developers
Ltd.
HDFC Investments
Ltd.
HDFC PropertyVentures Ltd.
Wholesale Banking Services
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Wholesale Banking Services The Bankstarget market ranges from large manufacturing companies in the Indian
corporate to small & mid-sized corporate and agri-based businesses
HDFC provides a wide range of commercial and transactional banking services,
including working capital finance, trade services, transactional services, cash
management, etc.
The bank is also a leading provider to corporate customers, mutual funds, stock
exchange members and banks
Corporate-
Funded Services
Non Funded Services
Value Added Services
Internet Banking
Small and MediumEnterprises-
Funded Services
Non Funded Services
Specialized Services
Value added services Internet Banking
Financial Institutions andTrusts-
BANKS- Sub-Membership,RTGS submembership, FundTransfer, ATM Tie-ups, Tax
Collection FinancialInstitutions
Mutual Funds
Stock Brokers
Insurance Companies
Commodities Business
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Wholesale Banking - Facts
The business from this segment registered a healthy growth, The
wholesale deposits grew by around 27.4%, while wholesale advances
showed a growth of over 26.7%
Consolidated its position as a leading player in the cash managementbusiness
Wholesale banking branch are also in Bahrain, a branch in Hong Kong and
two representative offices in UAE and Kenya. The branches offer the
Banks suite of banking services including treasury and trade financeproducts to its corporate clients
R il B ki S i
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Retail Banking Services
HDFC Bank was the first bank in India to launch an International DebitCard in association with VISA (VISA Electron). The Bank launched its
credit card business in late 2001
The Bank is also one of the leading players in the merchantacquiring
business with over 70,000 Point-of-sale (POS) terminals for debit / credit
cards acceptance at merchant establishments
The Bank also has a wide array of retail loan products including Auto
Loans, Loans against marketable securities, Personal Loans etc.
It is also a leading provider of Depository Participant (DP) services for
retail customers, providing customers the facility to hold their
investments in electronic form. The products through alternative delivery channels like ATMs, Phone
Banking, Net Banking and Mobile Banking
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Retail Services
Loan Product
Auto Loan
Loan AgainstProperty
Personal loan
Credit cardCommercial
vehicles finance
Home loans
Retail businessbanking
Working Capital
FinanceHealth Care
Finance
Education Loan
Gold Loan
Deposit Product-
Saving a/c
Current a/c
Fixed deposit
Demat a/c
Safe DepositLockers
Investment &Insurance-
Mutual Fund
Bonds
Insurance
Equity and
DerivativesMudra Gold Bar
Cards and Services-
Credit Card
Debit Card
Prepaid Card
Bill pay
Direct PayVisa Money
Transfer
Online Payment ofDirect Tax
Mobile Banking
ATM
Phone BankingEmail Statements
Branch Network
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Retail Banking - Facts
The growth in retail banking business was robust during the financial yearended March 31, 2011. The Bankstotal retail deposits grew by over 23.3%
to - 139,961 crore in the financial year ended March 2011, driven by retail
savings balances which grew much faster at 28.0% during the same period
The Banksretail assets grew by 26.8% to - 80,113 crore driven primarily
by a growth in mortgages, business banking, commercial vehicle loans and
auto loans
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Comparison
0
10
20
30
40
50
60
70
2006 2007 2008
Wholesale
Retail
0
200
400
600
800
1000
1200
2006 2007 2008
Wholesale
Retail
Figure 2 TOTAL DEPOSITSFigure 1 NET REVENUES
HDFC Bank is a consistent player in the private sector bank and have a
well-balanced product and business mix in the Indian as well as overseasmarkets.
Customer segments (retail & wholesale) account for 84% of Net
revenues ( FY 2008)
Higher retail revenues partly offset by higher operating and credit costs.
Equally well positioned to grow both segments
Treasury
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Treasury
Foreign Exchangeand Derivatives
Local CurrencyMoney Market &Debt Securities
Equities
To comply with statutory reserve requirements, the bank is required
to hold 25% of its deposits in government securities. The Treasury
business is responsible for managing the returns and market risk onthis investment portfolio
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Treasury
The treasury group is responsible for compliance with reserverequirements and management of liquidity and interest rate risk on the
Banks balance sheet
During the financial year ended March, 2011, revenues from foreign
exchange and derivative transactions grew by 26.2% to Rs. 786.3 crore
These revenues were distributed across large corporate, emerging
corporate, business banking and retail customer segments
Geographical Revenue
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Geographical Revenue
Segmentation IndexRevenue Domestic Growth% Foreign Growth %
2006 1 1
2007 1.15 16 1.44 44
2008 2.46 113 1.99 38
2009 1.49 (39) 2.77 392010 1.23 (17) 3.17 14
Revenue has been increased from 2006 to 2010 and is still
growing at acceptable pace There is a negative growth in terms of domestic revenues
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Geographic Spread of HDFC
6%
32%
28%
34%
No. of Branches
Rural
Semi-Urban
Urban
Metro-Politian
Segmental Growth
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Segmental Growth
FY07 FY08 FY09 FY10
Retail Banking 94% 77%
Wholesale Banking 99% 78%
Treasury 191% 331% 101% 83%
Life Insurance 115% 112%
General Insurance 121% 107%
Venture Fund
Management
53%
In the last few years Retail Banking has been shrinking
Venture Fund Management has added another revenue potential
Overall market share
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Overall market share
For the quarter ended September 2011, its total income was 7,929.4crore, an increase of 37.4% over 5,770.7 crore, for the quarter ended
September 30, 2010
Net revenues (net interest income plus other income) were 4,156.2 croreas compared to 3,487.0 crore for the corresponding quarter of the previous
year
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Total deposits were 230,676 crore, up by 18.1% from last year
Savings account deposits at 69,017 crore increased 15.9%
The Banks branch network stood at 2,150 branches in 1,141 cities (an
increase of 385 branches from 1,765 branches
6,520 ATMs, (an increase of 1,799 ATMs from 4,721)
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Information Technology
Bank has made substantial investments in its technology platform andsystems, built multiple distribution channels
That including an electronically linked branch network, automated
telephone banking, internet banking and banking through mobile phones,
to offer its customers convenient access to various products.
Highlights of 2010 11
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Highlights of 2010-11
Net Profits of Rs. 3926 Crore, an increase of 33% over the previousyear
Balance Sheet Size Rs. 277,353 Crore as on 31stMarch, 2011
Total Deposits of Rs. 208,586 Crore, an increase of 24.6% over previous
year
Network of 1986 Branches and 5471 ATMs in 996 cities as on 31stMarch, 2011
BanksCapital Adequacy Ratio as on 31stMarch ,2011 stood at 16.2%
as against regulatory minimum of 9%
Total Advances were Rs. 159,983 Crore, an increase of 27.1% over theprevious year
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Net Revenues
2006-07 : 498,471 Lacs 2007-08 : 751,103 Lacs
2008-09 : 1,071,176 Lacs
2009-10 : 1,236,953 Lacs
2010-11 : 1,487,828 Lacs
Profit After Taxes
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Profit After Taxes
2006-07 : 114,145 Lacs
2007-08 : 159,018 Lacs
2008-09 : 224,493 Lacs
2009-10 : 294,870 Lacs
2010-11 : 392,640 Lacs
P fi M i P fi /R
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Profit Margin= Profit/Revenues
2006-07 : 22.89% 2007-08 : 21.17%
2008-09 : 20.95%
2009-10 : 23.84%
2010-11 : 26.39%
P fit Aft T i (R C )
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Profit After Tax in (Rs. Crore)
1141
1590
2245
2949
3926
0
500
1000
1500
20002500
3000
3500
4000
4500
Years
2007 2008 2009 2010 2011
N P f i A t (%)
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Non Performing Assets (%)
1.74%
1.54%
0.48%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
2.00%
Year
2009 2010 2011
DPS (R )
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DPS (Rs.)
78.5
10
12
16.5
0
2
4
6
810
12
14
16
18
Year
2007 2008 2009 2010 2011
EPS (R )
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EPS (Rs.)
36.3
46.252.9
67.6
85
0
10
20
30
4050
60
70
80
90
Year
2007 2008 2009 2010 2011
Balance Sheet Size (Rs. Crore)
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183271222459
277353
0
100000
200000
300000
Year
2009 2010 2011
Advances (Rs. Crore)
98883125831
159983
0
50000
100000
150000
200000
Years
2009 2010 2011
Deposits (Rs. Crore)
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142812167404
208586
0
100000
200000
300000
Year
2009 2010 2011
Savings Deposits (Rs. Crore)
34915 49877
63448
0
50000
100000
Year
2009 2010 2011
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Capital Adequacy (%)
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15.7
17.4
16.2
14
15
16
17
18
Year
2009 2010 2011
Return on Capital (%)
16.2
16.816.5
15.5
1616.5
17
Year
2009 2010 2011
ATMs (Nos )
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ATMs (Nos.)
32954232
5471
0
20004000
6000
Year
2009 2010 2011
Cities (Nos.)
0
500
1000
1500
Year
2009
2010
2011
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Rupee Spent in 2010 11
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Rupee Spent in 2010-11
41.48%
31.62%
8.43%
8.36%
6.15%3.96%
Rupee Spent
Interest Expense = 41.48%
Operating Expense =
31.62%
Provisions = 8.43%
Tax = 8.36%
Transfer to Reserve =6.15%
Dividend & Tax on
Dividend = 3.96%
FINANCIAL PERFORMANCE (in crore)
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FINANCIAL PERFORMANCE (in crore)
March 31, 2011 March 31, 2010
Deposits and Other
Borrowings
222,980.5 180,320.1
Advances 159,982.7 125,830.6
Total Income 24,263.4 20,155.8
Profit before
Depreciation and Tax
6,316.1 4,683.5
Net Profit 3,926.4 2,948.7
Profit brought forward 4,532.8 3,455.6
Total Profit available
for Appropriation
8,459.2 6,404.3
Financial Analysis
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yAs shown in the graphs :
HDFC Bank has a consistent high CAR Ratio, which signifies the solid position
of the bank.
NPAs of HDFC Bank are very low. This shows the banks good relations with
its customer.
Deposits are increasing continuously which shows the good services
provided by the bank.
NIM for the bank is also good which further solidifies its position in the
market.
Profit margins are increasing year by year.
Market Capitalization
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Market Capitalization
Market Capitalization depends upon the future performance of the companyto a large extent
It is different from profit margin and profitability
PE Ratio = Market Capitalization
Profit
Market Capitalization ( MC)
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Market Capitalization ( MC)
MC= PE Ratio* Profit After Tax
2006/07 = 26.29 * 114145 lacs = 3000872 lacs
2007/08 = 28.80 * 159018 lacs = 4579718 lacs
2008/09 = 18.42 * 224493 lacs = 4135161 lacs
2009/10 = 28.62 * 294870 lacs = 8439179 lacs
2010/11 = 27.59 * 392640 lacs = 10832937 lacs
Leading banks by market
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capitalization
Banks Majority
shareholding
Market Cap
(Billion $)
Stock Listing
SBI Government 36.6 Mumbai,
London
ICICI Private 25.26 Mumbai, NewYork
PNB Private 7.6 Mumbai
IDBI Government 2.9 Mumbai
HDFC Private 22.2 Mumbai
AXIS Bank Private 11.6 Mumbai,
London
Capital Structure
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Capital Structure
As on 30thJune 2010, the authorized capital is Rs 550 Crore
The paid up capital is 459,60,07,030
HDFC Group holds 23.63% of the banks equity
American Depository shares hold around 17.05% of equity
27.45% is held by Foreign Institutional Investors ( FII)
The bank has about 433078 number of shareholders
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Competitive Analysis
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Competitive Analysis
Indiasbanks have grown at a rapid pace over the past 2 decades after thefinancial liberalization
This growth has still lacked in meeting the massive demand in the need of
financial intermediation. It has led to the growth on non-banking
financing companies (NBFCs) and microfinance companies
Major banks in India are either state owned or previous government
owned institutions which have been fully privatized like ICICI and HDFC
Bank
Competitive Analysis
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Competitive Analysis
State Bank of India (SBI)
SBI is IndiasLargest Bank which is majority owned by the government. The
Company has a number of Subsidiaries and has been a market
outperformer in recent times. Revenues of $22 billion. The SBI has 7
subsidiaries of which 2 have been merged and 5 are remaining
State Bank Bikaner Jaipur
State Bank of Hyderabad
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
Competitive Analysis
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Competitive Analysis
ICICI Bank
This is the largest Indian Private Bank with operations in all FinancialServices Sectors. The Company has faced a bad time during the Lehmandownturn but has recovered well
Revs of $12.5 billion. ICICI Bank is also strong in almost all sectors of thefinancial industry and has one of the strongest management teams in thecountry
The company which overextended itself in the 2007-2008 boom has nowreduced the size of its risky segments and is again back on the growthtrajectory.
Competitive Analysis
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Competitive Analysis
Punjab National Bank
Punjab National Bank (PNB) , is the second largest PSU bank with about
5000 branches across 764 cities
The Bank like BOB and SBI has shown good growth while at the same time
managed to control bad debt
Competitive Analysis
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Competitive Analysis
Axis Bank
Axis Bank has been the best performing private bank along with HDFC
Bank showing excellent growth in top line and bottom line
The Bank has been expanding into insurance and investment banking
(acquired Enam)
The Bank was promoted jointly by UTI, LIC and other state owned general
insurers
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Competitive Analysis
12.32%
26.34%
16.76%
10.46%
4.05%
30.07%
Market Share
ICICI
HDFC
Axis
Kotak
YES Bank
Others
Growth Rate ICICI Bank
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Growth Rate ICICI Bank
This fiscal's credit growth would be 18 per cent, aided by corporate aswell as retail segment
ICICI Bank has reported a 77.5 per cent jump in its consolidated net profit
at Rs 2,039 crore for the third quarter (Q3) ended December 31, 2010, driven
by a rise in interest income and lower provisioning against bad loans
On stand-alone basis, ICICI Bank's net profit increased 30.5 per cent to Rs
1,437 crore in Q3, from Rs 1,101 crore in the same period a year ago
Growth Rate State Bank of India
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Growth Rate State Bank of India
The bank, which controls a quarter of Indian bank loans and depositsalong with its associates, and rivals ICICI Bank and HDFC Bank are seeing
strong demand for loans and asset quality improvement on the back of a
rapidly growing economy
State Bank posted a net profit of 28.28 billion rupees ($620 million) in thefiscal third quarter ended December 2009, versus 24.79 billion rupees
Gross advances grew 22 percent to reach 7.40 trillion rupees as on end-
December 2010 from 2009
The bank's net non-performing asset ratio fell to 1.61 percent in the
quarter from 1.88 percent a year ago as improved consumer and business
sentiment resulted in slowdown in bad loans pile up
Growth Rate State Bank of India
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Growth Rate State Bank of India
Shares of State Bank of India, valued at $35 billion, rose nearly 24 percentin 2010, compared with a 17 percent rise in the main market and 33 percent
gain in the banking sector index
Growth Rate Punjab National Bank
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Growth Rate Punjab National Bank
The Bank posted a net Profit of Rs.3233 crore during April-December 2010compared to Rs.2770 crore in the corresponding period of previous financial
year registering a YOY growth of 16.7%
Operating Profit for the same nine months stood at Rs 6548 crore as
against Rs 4994 crore in the previous financial year recording a YOY growth of31.1%
Total Business of the Bank crossed the landmark of Rs 5 lakh crore to
reach Rs.5,10,125 crore as compared to Rs. 4,04,373 crore in Dec' 2009,
showing a YOY growth of 26.2%
Deposits of the Bank rose to Rs.2,88,873 crore as on 31.12.2010 as
compared to Rs 2,33,946 crore exhibiting a YOY growth of 23.5%
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Direct ComparisonHDFC Bank Vs
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Axis BankTotal IncomeQ2 FY2010
HDFC BanksQ2 is Rs.5770.70 Cr which is higher by 7.66% on previous Qtr
Axis Banks Q2 is Rs.4657.49 Cr, which is higher by 7.65% over previous
Qtr
Inference
At this level, Axis has further reduced the Edge of HDFC Bank to just
23.9% - because of higher other income
Axis Bank is scoring in income from investments, income from balances
with RBIs etc, and other Income, whereas, HDFC Bank is scoring well in
respect of Interest on Advances
Direct ComparisonHDFC Bank Vs
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Axis Bank
Interest ExpendedQ2 FY2010
HDFC BanksQ2 is Rs.2283.72 Crhigher by 13.11% over previous Qtr
Axis BanksQ2 is Rs.2009.15 Crhigher by 10.89% over previous Qtr
Inference
Axis Bank has a clear edge of 13.67% in respect of lower interest
expended compared to HDFC Bank
Direct ComparisonHDFC Bank Vs
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Axis Bank
Employees CostQ2 FY2010
HDFC BanksQ2 is Rs.710.57more by 6.52% over previous Qtr
Axis BanksQ2 is Rs.405.30 Crdown by 2.67% over previous Qtr
Inference
In this expense item, Axis has a huge edge of 75.32% over HDFC Bank
Direct ComparisonHDFC Bank Vs
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Axis Bank
Other Operating ExpensesQ2 FY2010
HDFC BanksQ2 is Rs.969.31 Crup by 4.76% over previous Qtr
AxissQ2 is Rs.756.69 Crup by 16.76% over previous Qtr
Inference
Axis Bank has an edge of 28.1% over HDFC Bank in this item of expense
Direct ComparisonHDFC Bank Vs
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Axis Bank
Operating ProfitQ2 FY2010
HDFC BanksQ2 is Rs.1807.10 Crhigher by 3.34% over previous Qtr
AxissQ2 is Rs.1486.35 Crhigher by 2.5% over previous Qtr
Inference
HDFC Bank has an edge of 21.58% over Axis Bank at operating level
Direct ComparisonHDFC Bank Vs
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Axis Bank
Provisions Q2 FY2010
HDFC BanksQ2 is Rs.454.48 Crdown by 18.11% over previous Qtr
Axis BanksQ2 is Rs.378.76 Crup by 13.74% over previous Qtr
Inference
HDFC Banksprovisions are higher by 19.99% compared to Axis Bank
Direct ComparisonHDFC Bank Vs
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Axis Bank
Tax ExpenseQ2 FY2010
HDFC BanksQ2 is Rs.440.48up by 15.31% over previous Qtr
AxissQ2 is Rs.372.45down by 0.73% over previous Qtr
Inference
HDFC Bank pays more tax by 18.27% compared to Axis Bank
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Direct ComparisonHDFC Bank Vs
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Axis Bank
Capital Adequacy RatioQ2 FY2010
HDFC BanksCAR is 17 against Axis Banks13.68which gives HDFC Bank an
edge of 24.27%
Direct ComparisonHDFC Bank Vs
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Axis Bank
Basic EPSQ2 FY2010
HDFC Bank has a Basic EPS of Rs.19.8 against Axis BanksRs.18.01 - more
by 9.94% over Axis Bank
Inference
At this level, Axis Bank has closed the performance Gap considerably
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Axis Bank
Percentage of Gross/Net NPAQ2 FY2010
HDFC BanksQ2 is 0.3 and Axis BanksQ2 also is 0.34 which is very close for
both
Direct ComparisonHDFC Bank Vs
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Axis Bank
Market Price and PE RatioQ2 FY2010 HDFC Bank
The Market Price of HDFC Bank is Rs.2343
HDFC BanksQ2 EPS is Rs.19.8. Annualising this EPS ( x 4) the annual EPS isaround Rs.79.2
The PE Ratio on this Basis is 29.58
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Direct ComparisonHDFC Bank Vs
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Axis Bank
Market Price and PE RatioQ2 FY2010 Inference
While HDFC Bank may quote at a premium over Axis based on size, yet, Axis
Bank appears to be quite underpriced for its growth rates at this point of
time
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Key Focus
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Key Focus
Understanding of customers financial needs and providing banking
solutions
Wide range of products and services to cater both retail and wholesale
customer segments
Market Leaders in various products of retail banking such as Credit Cards
and Auto Loans
Main focus on balancing growth with diversified revenues, appropriatemargins and healthy asset quality
Key Focus
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y
Providing financial services to the under banked and rural sector
Helping Farmers with products like Tractor Loan, Kissan Gold Card, Loan
against Warehousing Receipts etc
In line with growth strategy today 30% of the branches are located in rural
and under banked areas
Mission & Objectives
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j
Aim to become World Class Indian Bank
Objective is to build sound customer franchises across distinct businesses
To achieve healthy growth in profitability with the Banks Risk Appetite
To do all this and maintain high level of ethical standards and corporate
governance
Merger with CBoP
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About Centurion Bank of Punjab
Was one of the leading private sector bank in India
Strong nationwide presence with 394 Branches and 452 ATMs in 180 Cities
Employee base of more than 7500
Was listed in major stock exchanges
Strong player in FOREX services, personal loans, mortgages and
agricultural loans
Merger with CBoP
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Reasons of Merger
HDFC wanted to add scale, geography and experienced staff to its
franchise
CBoP was the right fit in terms of culture, strategic intent and approach tobusiness
Merger was Win-Win situation for both the banks
Combined entity became even more strong in the banking market
Merger with CBoP
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Details of Merger
Finalised on 26th Feb., 2008
Swap Ratio of 1:29 (1 share of HDFC Bank for every 29 shares of CBoP
Bank)
Acquisition came for Rs.9510 Crores, one of the largest merger in banking
history of India
Merger was EPS Dilutive for HDFC Bank in the interim
Merger with CBoP
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Details of Merger
Merger gave access of 394 branches of CBoP to HDFC Bank, increasing its
presence in northern and southern India
CBoPsstrong SMEs relationship helped expanding HDFCs Base
Created Indias 7th Largest Bank
Induction of experienced work force in HDFC
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Details of Merger
Nation Wide network of 1148 Branches largest in India
Strong Deposit Base of Rs. 120000 Crores and Net Advances of around Rs.
85000 Crores
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Current Business Strategy
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Develop innovative products and services that attract its targetedcustomers and address inefficiencies in the Indian financial sector
Leverage its technology platform and open scaleable systems to deliver
more products to more customers and to control operating costs
Focus on healthy earnings growth with low volatility
Current Business Strategy
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To increase the market share in the growing banking industry by following adisciplined growth strategy, focusing on quality and not on quantity and
delivering high customer service
To maintain the current high standards for asset quality through disciplined
credit risk
To develop innovative products and services that attract the targeted
customers
To continue developing products and services that reduce the cost of funds.
Segmentation Strategy
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Demographic variables
Location
Targeting the Metro cities and the developing cities
OccupationThey are also focusing on targeting the business men and the salariedclass people
Age
Their main focus is on the middle aged grouped people but they are tryingto attract the senior citizens and the minors also.
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Targeting Strategy
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Target market
Corporate Banking Market
This market target the industries and fulfills the financial needs
Capital Market
This segment is targeted on the long term needs of the individuals
Retail Banking Market
This segment is for retail investors and provides them with short termfinancial credit for personal and household needs.
Positioning strategy
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HDFC has positioned itself as a bank which gives higher standard ofservices through product innovation for the diverse needs of the
individuals and other corporate clients. So they look at highlighting the
following points in their positioning :
Customer centric Service oriented
Product Innovation
Acquisition Strategy
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Customer Segment as an acquisition strategy
Banks are now not targeting customer who want to associate themselveswith foreign banks just for status symbol as it wastes a lot of banksresources
Value Proposition as an acquisition strategy
The bank has to provide world class services to all types of customers if itwants to retain them and increase the value of the bank.
Pricing as an acquisition strategy
HDFC has come up with a strategy of giving better services to itscustomers by reducing the minimum balance requirements. Otherwise ininternational banks the minimum balance required is Rs 10,000 but HDFChas brought it down to Rs 5000
Growth Opportunity Strategy
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It is starting to focus in the rural India and with the countrys GDP is
poised to grow at 8% plus over the next few years, so it has well
positioned itself to take this opportunity to full use
The bank is coming up with innovative offering such as, offering loans
against gold as the gold prices are continuously rising
Giving loans against gold helps them tab business from small shop keepers
as well
It is acquiring banks in the north and south parts of the country which willget them more customers and will help them grow faster
Customer Retention Strategy
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HDFC has started following the below mentioned strategies to retain itscustomer in order to retain its customers
All petty charges for its primes customers have been waived off
Services like locker, de mat etc is now charged at 50% only
The debit card charges have been taken off
The bank keeps updating with the customer as to the new service that
they introduce
Also informs the customer about the charges that have been waived off
Marketing Strategy
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Scientific marketing campaigns are being undertaken using customer data,
usage pattern , preferences etc
The marketing analytics initiatives helps the bank come up with different
ways in which they can measure the efficacy of the campaigns that theyorganize
This also helps then to test or try new campaigns the way they want ,
experimenting with creativesetc.
Other strategies
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Building the trust of the customers
Providing a large number of products and services
Location of the branches and ATMs
Providing customers with services like Home banking, Mobile banking, Net
banking etc
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SCENARIO
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Growth in mortgages, business banking, commercial vehicle loans andauto loans (2010-11)
Customer base grew to 21.9 million customers
Increased its network and product penetration initiatives
Increased visibility of net banking and phone banking
SCENARIO
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Success of banks multi-channel strategy 80% of customer initiatedtransactions serviced through the non-branch channels
Focus on the credit card portfolio
5 million credit cards as of March 2011
NO-LIMIT CREDIT CARDS
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HDFC Bank, the largest credit card issuer in the country, has launchedIndia's first ultra-premium credit card for the UBERrich
Aptly named INFINIA", the card comes with virtually no limits not
just in terms of spend, but also the luxuries such customers are
accustomed to.
The card will be initially offered to a select 5000 individuals.
FOREXPLUS PLATINUM CARD
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Premium Forex card for the Global Indian
Prepaid travellerscard
Chip based card
Best-in-class security
0.5% cash-back on purchases
Offers free lounge access across major international airports
Available for Euro, Dollar and Pound
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ZAFIN LABS
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Product called miRevenue
Used in the retail business area
Planning to extend the scope
Attained reduction in the time for charging the customers
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Loans
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Available for all new home loan customers of Indian origin applying beforeJanuary 31,2010
Same fixed rate, irrespective of the amount
Very attractive rates compared to the other large players in the marketoffering similar products
Overwhelming response
MOVE IN HOME LOANS
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Available for Readyto moveor Resale properties
Loans are facilitated with minimal delays
Made available quickly
QUICKREMIT
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Online remittance service
From Singapore and UK
Completely online mode to remit money to India, without the need to visit
a bank
Tie-up with DBS Bank in Singapore
Accessible through any bank in UK
HDFCQATAR BANK
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Tied up with the International Bank of Qatar (IBQ) to launch banking
services in Qatar
Allows Indian expatriates in Qatar to access HDFC Banks products and
services
Combination of NRE account in India and NRI account in Qatar facilities
like centralized banking, fee waiver on debit card and remittance services
etc
SWIFT
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Personal loans
Processed in 24 hours
Available for all those who holds an account with HDFC Bank
From September 2011
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State Bank of India
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State Bank of India (SBI) is the largest nationalized commercial bank in
India in terms of assets, number of branches, deposits, profits and
workforce. With the liberalization of the Indian banking industry in the
mid-1990s, SBI faced stiff competition from the private sector and foreign
banks which resulted in significant loss of its market share.
ICICI Bank
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ICICI Bank Second largest bank in India
Strong diversified financial services franchise in India
ICICI Bank has taken up specific initiatives to ramp up financial literacy aswell as intermediation to the underserved and under-banked segments inboth rural and urban areas
ICICI Bank offers a complete suite of products and services to meet theindividual financial requirements of customer segments. Savings,investments and insurance products are made available to its rural and
agri customer base
The Bank also offers microfinance services to low-income households andcrop loans, farm equipment loans, commodity based loans to farmers.
Axis Bank
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3rd largest private sector bank
Aggressive branch and ATM expansion to 1021 branches and 371 ATMs to
be upcoming in tier II and Tier III cities.
Expanding global reach by way of setting up 3 branch offices in Singapore ,Dubai and Hong Kong and 2 representative offices in Shanghai and Dubai
recently
Axis Bank offers a vast spectrum of services encompassing Large and Mid-
Corporate Banking, SME Banking, Agri-Business Banking, Retail Bankingand International Banking.
Axis Bank
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Axis Bank's network of over 1,200 branches and 4,900 ATMs is spread
across more than 680 cities and towns across the country
Instead of piecemeal efforts of promoting their debit card, the bank has
launched what it calls the first ever filmi Platinum debit and credit card
across 25 cities in India. The objective to offer movie deals on movietickets through one exclusive card. The bank therefore hopes to carve out
a niche in a space not fully explored by competition
Mergers and Acquisitions
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Standard Chartered Acquires ANZ Grindlays Bank (November '00)
Intent
Standard Chartered wanted to capitalise on the high growth forecast forthe Indian economy. It aimed at becoming the world's leading emergingmarkets bank and it thought that acquiring Grindlays would give it a well-established foothold in India and add strength to its managementresources. For ANZ, the deal provided immediate returns to itsshareholders and allowed it to focus on the Australian market. Grindlayshad been a poor performer and the Securities Scam involvement hadmade ANZ willing to wind up.
Benefits
Standard Chartered became the largest foreign bank in India with over 56branches and more than 36% share in the credit card market.
Mergers and Acquisitions
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ICICI Bank Ltd. Acquires Bank of Madura (March '01)
Intent
ICICI Bank Ltd wanted to spread its network, without acquiring RBI's
permission for branch expansion. BoM was a plausible target since its cash
management business was among the top five in terms of volumes. Inaddition, there was a possibility of reorienting its asset profile to enable
better spreads and create a more robust micro-credit system post merger.
BoM wanted a (financially and technologically) strong private sector bank
to add shareholder value, enhance career opportunities for its employees
and provide first rate, technology-based, modern banking services to itscustomers
Mergers and Acquisitions
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Benefits
The branch network of the merged entity increased from 97 to 378, including
97 branches in the rural sector. ICICI gained an additional 1.2 million
customer accounts, besides making an entry into the small and medium
segment. It possessed the largest customer base in the country, thus
enabling the ICICI group to cross-sell different products and services.
Mergers and Acquisitions
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Motives Behind Consolidation
Growth- Organic growth takes time and dynamic firms prefer acquisitionsto grow quickly in size and geographical reach
Synergy- The merged entity, in most cases, has better ability in terms of
both revenue enhancement and cost reduction
Managerial efficiency - Acquirer can better manage the resources of thetarget whose value, in turn, rises after the acquisition
Strategic motives - Two banks with complementary business interests can
strengthen their positions in the market through merger.
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Motives Behind Consolidation
Market entry - Cash rich firms use the acquisition route to buyout an
established player in a new market and then build upon the existing
platform
Tax shields and financial safeguards- Tax concessions act as a catalyst for
a strong bank to acquire distressed banks that have accumulated losses
and unclaimed depreciation benefits in their books
Regulatory intervention - To protect depositors, and prevent the de-stabilisation of the financial services sector, the RBI steps in to force the
merger of a distressed bank.
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STRENGTH
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Indian banks have compared favourably on growth, asset quality and
profitability with other regional banks over the last few years. The banking
index has grew at a compounded annual rate of over 51 per cent since
April 2001 as compared to a 27 per cent growth in the market index for
the same period
Bank lending has been a significant driver of GDP growth and employment
Extensive reach through vast networking & growing number of branches &
ATMs
The government's regular policy for Indian bank since 1969 has paid rich
dividends with then nationalization of 14 major private banks of India
According to a report by ICRA Limited, a rating agency, the public sectorbanks hold over 75% of total assets of the banking industry, with the
private and foreign banks holding 18.2% and6.5% respectively
WEAKNESS
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PSBs need to fundamentally strengthen institutional skill levels especially
in sales and marketing, service operations, risk management and the
overall organizational performance ethic & strengthen human capital
The cost of intermediation remains high and bank penetration is limited to
only a few customer segments and geographies
Structural weaknesses such as a fragmented industry structure,restrictions on capital availability and deployment, lack of institutional
support infrastructure, restrictive labour laws, weak corporate governance
and ineffective regulations beyond Scheduled Commercial Banks (SCBs)
Refusal to dilute stake in PSU banks: The government has refused to dilute
its stake in PSU banks below 51%
Opposition from Left and resultant cautious approach from the North
Block in terms of approving merger of PSU banks may hamper their
growth prospects in the medium term
OPPORTUNITY Growth driven by new products and services that include opportunities in
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Growth driven by new products and services that include opportunities in
credit cards, consumer finance and wealth management on the retail side,
and in fee-based income and investment banking on the wholesale banking
side
With the growth in the Indian economy expected to be strong for quite
some time especially in retail banking, mortgages and investment services
Reserve Bank of India (RBI) has approved a proposal from the government
to amend the Banking Regulation Act to permit banks to trade in
commodities and commodity derivatives
Given the demographic shifts resulting from changes in age profile and
household income, consumers will increasingly demand enhanced
institutional capabilities and service levels from banks
THREAT
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Threat of stability of the system: failure of some weak banks has often
threatened the stability of the system
Rise in inflation figures which would lead to increase in interest rates
Increase in the number of foreign players would pose a threat to the PSBas well as the private players
Increase in CRR rate
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STRENGTH
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Leader in home loan segment
Right strategy for products
Distribution structure
Brand image
High degree of customer satisfaction
Alliance between HDFC and Standard Life giving a strong brand backing
Robust Risk control Framework
Network of 500 branches and agents across 700 cities
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OPPORTUNITIES
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Untapped rural market
Home loan segment
Fast growing insurance business
THREAT
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Risk of fraud and NPA
Major private players
RBI policies
Increase in funding cost
Economic instability and global crisis
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SWOT - ICICI
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STRENGHTS
ICICI is now a global player in International Banking through its operations
18 countries
ICICI is considered as the pioneer in usage of Internet services for Online
Banking
Advanced infrastructure with sound IT base
SWOT - ICICI
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WEAKNESS
High Bank Service Charges: ICICI bank charges highly to
customers for the services provided by them when compared to other
bank & that is why it is only in the reach of higher class of society
Less Credit Period: ICICI bank provides credit facilities but only upto limited period
SWOT - ICICI
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OPPURTUNITIES
Rise in upper and middle class population due to increase in GDP,
therefore could introduce economical version of their services
Largely unexplored market in regions where only PSBs operate
SWOT - ICICI
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THREATS
ICICI Bank is facing tight competition locally as well as internationally.
Bank like CITI Bank, HSBC, ABM, Standard Chartered, HDFC also provide
equivalent facilities like ICICI do and also ICICI do not have consistency in
its international operation
ICICI levies higher service charges for various transactions making it
expensive for major sections of the society
ICICI Bank provides all services through electronic computerized machines.
This creates problems to the less educated people
SWOTAxis Bank
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STRENGTH
Banking Services Include Corporate Credit, Retail Banking, Business
Banking, Capital Markets, Treasury And International Banking
Sound technological platform with Centralized Database and Operations
Corporate Banking: Current Account deposits grew by 24%yoy, from Rs.
20,045 cr as at end March08 to Rs. 24,822crores as at end March09 Retail Banking: Savings Bank Deposits Grew To Rs. 25,822 cr.
On 31st March 2009 From Rs. 19,982 Cr. As On 31st March2008 Showing A
Year On Year Growth Of 29%
SWOTAxis Bank
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WEAKNESS
Market capitalization is very low
Not having Image UTI (fraud)
Higher cost
Customer service
SWOTAxis Bank
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OPPORTUNITY
Large retail and corporate market
Wide scope in rural India
Other Activity (Non Banking Activity)
People are become more service oriented
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SWOT - Yes Bank
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STRENGTH
High Quality, Customer Centric, Service Driven, Private Indian Bank
Catering To The FutureIndustries Of India
The bank has adopted International Best Practices, the highest standard of
service, quality and operational excellence
Credible And Transparent Performance Management Process Total Deposits Rs 1,61,694 million
Net Advances Rs 124,031 million
Net NPA 0.33%
SWOT - Yes Bank
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WEAKNESS
Less wide network
Not in every state
Less promotional activity
Unknown brand
SWOT - Yes Bank
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OPPORTUNITY
Very wide market
Other activity(insurance, stock broking, mutual fund)
Wide scope in rural area
SWOT - Yes Bank
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THREAT
Very high competition Private bank market (ICICI Bank, HDFC bank), In
public sector (BOB, PNB)
Government Policy
Other better Saving, investment option available (like Insurance, Mutual
fund, Real-estate, Gold)
SWOT - SBI
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STRENGTH
Strong domestic market position, sustaining reach and customer
confidence
SBS merger further hastens SBI and its associate banks merger and
helping defend its leadership position
Wide Distribution Network: Excellent penetration in the country withmore than 10000 core branches and more than 5100 branches of
associate banks (subsidiaries)
Government owns 60% stake in SBI. This gives SBI an edge over private
banks in terms of customer security
SBI offers very low transition costs which attracts small customers
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SWOT - SBI
OPPORTUNITIES
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OPPORTUNITIES
SBI could be the highest beneficiary from increasing adoption of E-
transactions
Investment in information technology will decrease transaction cost
Growth in general insurance will help increasing market share
Merger of all the associate banks (like SBH, SBM, etc) into SBI will create amega bank which streamlines operations and unlocks value
Planning to add 2000 branches and 3000 ATMs in 2008-2009. This will
further increase its reach
SWOT - SBI
THREATS
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THREATS
Opening of Indian Banking Sector in 2009 will cause intense competition.Large numbers of MNC banks are mushrooming in the Indian market dueto the friendly policies adopted by the government. This can increase thelevel of competition and prove a potential threat for the market shareof SBI bank
Large numbers of MNC banks are mushrooming in the Indian market dueto the friendly policies adopted by the government. This can increase thelevel of competition and prove a potential threat for the market shareof SBI bank
Private banks have started venturing into the rural and semi-urban sector,which used to be the bastion of the State Bank and other PSU banks
here was an employee strike in the year 2006 which disrupted SBIsactivities. This can be repeated in the future
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PORTERs 5 Force ModelINDIAN BANKING INDUSTRY
Large no of banks
High market growth rate
L it hi t
Non banking financialsector increasing rapidly
Deposits in posts
Bargaining power ofconsumer is very high
Large no of alternatives
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Low switching costs
Undifferentiated servicesHigh fixed cost
High exit barriers
Threat ofcompetitors
Deposits in posts
Stock MarketMutual Fund
Threat ofSubstitute
Large no. of alternatives
Low switching costsUndifferentiated services
Full information
Threat ofBuyer
Nature of suppliers
Few alternatives
RBI rules and regulations
Suppliers are notconcentrated forwardintegration
Threat ofSupplier
Product differentiation isvery difficult
Licensing requirement
Threat ofNew Entrants
Past Strategies of HDFCIntroduction of FIVE S , PART OF KAIZEN WORK PLACE TRANSFORMATION
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focuses on effective work place organization and believes in Small changes leadto large improvement.
S-1 SORT
SEIRI
S-2SYSTEMATIZ
E SEITON
S-3 SPIC-N-
SPAN SEIRO
S-4
STANDARDIZ
E SEIKETSU
S-5 SUSTAIN
SHITSUKE
SORT- It focus on eliminating unnecessary items from the work place. It
i ll f l bl fl I i
5 S of Kaizen
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is excellent way to free up valuable floor space. It segregate items as per
require and wanted. Frequently Less Required Frequently Remove
Required everything from workplace Wanted but not Required Junk
SYSTEMATIZE - Systematize is focus on efficient and effective Storage
method. That means it identify, organize and arrange retrieval. It largely
focus on good labelling and identification practices. Objective :- Aplace
for everything and everything in its place
SPIC- n SPAN - Spic-n-Span focuses on regular clearing and self
inspection. It brings in the sense of ownership
STANDERDIZE - It focus on simplification and standardization. It involve
5 S of Kaizen
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standard rules and policies. It establish checklist to facilitatesautonomous maintenance of workplace. It assign responsibility for doing
various jobs
SUSTAIN- It focuses on defining a new status and standard of organized
work place. Sustain means regular training to maintain standardsdeveloped. It brings in self- discipline and commitment towards
workplace organization
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Successful Strategies
Best practices in terms of product offerings technology service levels risk
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Best practices in terms of product offerings, technology, service levels, risk
management and audit & compliance
Develop new product and technology is the main business strategy
Increase market share in Indias expanding banking and financial servicesindustry by following a disciplined growth strategy focusing on quality and
not on quantity and delivering high quality customer service.
Leverage our technology platform and open scalable systems to deliver
Successful Strategies
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Leverage our technology platform and open scalable systems to deliver
more products to more customers and to control operating costs
Develop innovative products and services that attract the targeted
customers that reduce bankscost of funds
Focus on high earnings growth with low volatility
Where Did They Go Wrong?
FOCUS ONLY ON HIGH END CUSTOMERS: The bank targets only the top
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FOCUS ONLY ON HIGH END CUSTOMERS: The bank targets only the top
bracket of clients and does not cater to the needs of small customers. Dueto this reason the bank may sometimes loose good clients
Not Equal to International Standard
Highly depended on individuals loans
Major Stake held by American financial group which are under stress in
economic slow down
Where Did They Go Wrong?
Managerial international presence
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Managerial international presence
No next line of leadership
Lack of infrastructure in rural area
Minimum balance to open a account is very high
Extension overseas holds lots of risk
Credit card department is not active
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THANK YOU