MUMBAI: HDFC Bank CEO-designate Sashidhar Jagdishan has said the lender’s bad loans on account of Covid-19 would be below what was seen during the global financial crisis. He also said that the bank could grow its loan market share from 9% to 15% without diluting credit standards by tapping the top end of the rural and semi-urban market, where it has built distribution capability.
In a conference call with analysts, Jagdishan said he considered himself lucky to take charge of a bank with a platform that is already geared for growth. The bank’s ‘strategic change agent’ was speaking at a conference call hosted by Macquarie, which was also attended by the bank’s CFO Srinivasan Vaidyanathan.
Part of the bank’s strategy to scale up was to implement digital banking 2.0, where the company would build on the capability of its existing digital platforms and also collaborate with them for customer acquisition. He said in future the bank’s customer will be able to use the lender’s ecosystem for everything — from purchasing a car to healthcare, where the company would stitch together a network of clients and service providers.
Jagdishan responded to queries on the auto loan controversy, media reports on delayed reporting to the credit bureau, and the call to investors by Rosen Law Firm, which was seeking to initiate class-action proceedings in the US.
Admitting that there were auto loan lapses on the part of certain individuals, Jagdishan said, “They were offering a GPS to a fraction of car loan customers. It is just that there were people who could have done it in a transparent way. He got some gratification from the vendor and that is something that is non-negotiable. We have always said that we are kind to operational errors but there are two things we will not tolerate — integrity and lackadaisical attitude. Sadly these are instances that have hit us on the latter side,” said Jagdishan.
Reacting to bank’s plans to scale business, curtail NPAs and go deeper into digital, Suresh Ganapathy, an analyst with Macquarie Capital Securities, said, “If that indeed is going to be the outcome in this pandemic, then it will be a fantastic outcome. It would be a class apart if they can restrict NPAs to such low levels. Plus the pre-provision operating profit level is 3.7% annually for them, as a percentage of average assets that’s a massive earnings power which can even digest credit costs of 5% of loans in a single year and still not make a loss,” he said.
On the class-action suit, Vaidyanathan said it was an attempt to rally investors to join a lawsuit and that the management was confident that there has been no wrongdoing. On the delay in reporting to the credit bureau, he said the bank had sought clarification from the RBI on its April 17 circular on how some loans have to be recognised and also had to change its systems, which led to some delay.