HDFC Bank to expand aggressively in next 5 years

It looks like aggression is finally back at HDFC Bank. India’s most valuable bank, HDFC Bank, is planning to open anywhere between 1,500 and 2,000 branches each year for the next five years in succession.

HDFC Bank has been facing a lot of headwinds in the recent past like the exit of Aditya Puri, the ban on issue of fresh cards, subdued ROI and net interest margins. Now HDFC Bank plans to introduce new product features every 3 weeks. This the first aggressive statement issued on the growth front by HDFC Bank in a long time.

Most of these branches will have two things in common. Firstly, all these branches will be digital from the perspective of customer on-boarding and servicing perspective. However, HDFC Bank does not want to lose out on its face-to-face communication with the customers.

Most of the relationship will not only customize solutions to the unique needs of customers, but will also these branches of HDFC Bank will also provide the emotional connect and relationship management required to offer financial solutions to customers.

The current numbers of HDFC Bank are quite formidable. It already has a total of 21,683 banking outlets. This can be broken up into 6,342 branches and 15,341 business correspondents as part of the network. As a POS opportunity, HDFC bank also has a robust presence of 18,130 ATMs and cash deposit machines as of March 2022.

HDFC Bank strongly believes that the branch expansion would help them directly in deposit accretion, especially of the CASA types. Additionally, it also facilitates the easy merger with HDFC Ltd.

Why is HDFC Bank getting so paranoid about branch expansion. It has to do with the merger deal with HDFC Ltd. The big concern for HDFC Bank from the merger would be mobilising a massive pool of deposits to meet regulatory requirements.

This includes the statutory CRR and SLR requirements. In the case of HDFC Ltd, they have Rs.420,000 crore of deposits but these are high cost deposits compared to the core banking business. 

The total business of HDFC Bank (loans plus deposits) has been growing at a frenetic pace over the last 10 years and in the latest quarter, HDFC Bank’s total deposits grew by a hefty 17% to Rs.15.59 trillion.

The low-cost current account and savings account (CASA) deposits accounted for 48% of total deposits substantially reducing the cost of funds. For FY21, loan book rose 21% to Rs.13.68 trillion. This gives HDFC Bank total business of Rs.29.27 trillion and a healthy credit deposit ratio of 87.7%.

Grand plans in the offing at HDFC Bank

HDFC Bank has a robust technology infrastructure that allows them to smartly use technology, not only to reach out to customers but also to ensure better monitoring and compliance so as to reduce the potential for gross NPAs.

The ban on HDFC Bank last year was due to a series of technology related issues that the bank faced, causing a lot of inconvenience to the customers. However, this ban has since been lifted and the bank is using aggression especially in it credit cards business.

Among the various products under the Digital 2.0 plan rollout, HDFC Bank will launch a new platform to integrate HDFC Bank customers, merchants and a wealth management platform for a totally seamless experience.

HDFC Bank plans to build most of these platforms in association with start-ups with the chutzpah since this is a highly specialized business and the start-ups in the Fintech space would come from the right ecosystem and will also have the right mindset for the same. Its net banking platform will be cable enabled.