Business Today
Essence of banking is in taking calculated risk, says HDFC Bank CEO Aditya Puri
HDFC Bank is morphing into a full-scale digital bank and is also exploring opportunities in the semi-urban and rural areas, says MD and CEO Aditya Puri.
HDFC Bank MD and CEO Aditya Puri

HDFC Bank MD and CEO Aditya Puri

HDFC Bank is morphing into a full-scale digital bank and is also exploring opportunities in the semi-urban and rural areas, says MD and CEO Aditya Puri. Edited excerpts of an interview with Business Today -
   
ON CHALLENGES IN RURAL  AND SEMI-URBAN AREAS

The challenges were in the areas  of operations, product , sales and technology  some three to four years back. We have now worked on these  areas. As you know, the customers  in these areas are quite disperse and loan ticket size is  also very small. So you obviously needed to get the correct business model to work this on a profitable basis. You must realize that it is not by chance you find a virgin territory in a rural and semi-urban  area, it must be  difficult to go there. These are difficulties that are not easy to solve but in the last three-four years , we have managed to find a way out.  Now we have models for semi-urban and rural areas which are profitable. Our brand is also phenomenal inside rural and semi-urban areas where 60 per cent of the population lives.  

ON RISK MANAGEMENT  IN RURAL AND SEMI-URBAN AREAS
 

We must understand that the essence of banking is in taking a calculated risk. The bank has never entered any product  category without doing  extensive pilot testing.  So in semi-urban and rural areas , why it took us three-four years ,  we kept testing our products. We have also made  our mistakes.   But the mistakes are small  and so nobody notices it.  And we keep rectifying it.  We never believe in sudden scaling up of operations.  We don't  go and say  now retail is an opportunity and we are going to be largest. We will never bet the bank on anything. We tested each market for at least  six months to an year , understood the pitfalls and took our losses , but  they ( losses)  were small. And only when we were confident of  what we were doing , only then we  started scaling it up.  In our bank , the risk people  or people handling risk do not report  to  the  business .  It only converges at my level.

SHARE OF RURAL  AND SEMI-URBAN  IN REVENUES

It is currently 15 per cent  of the total revenues. It  will be 30 -35 per cent in the next five years.  It won't be 50 per cent ( that we said earlier ) because the ticket size is very small.

ON COMPETITION FROM NEW PAYMENT BANKS AND SMALL BANKS IN RURAL AND SEMI-URBAN AREAS

The fact is  that semi-urban and rural areas are under-served by organized finance. There is scope for everyone. And this applies equally to financial inclusion. Each (bank ) one has a niche. Be it public , private or small banks, it  will be a combination of all ( helping in the inclusion agenda) . It's huge task  and more the  merrier.

ON DIGITAL BANKING INITIATIVES

We have invested in data warehousing, analytics, outbound call centre , models for  the credit , CRM (Customer Relationship Management),  etc.  Now we are in a position to launch  our most comprehensive offering which will be in line with global standards whereby everything you can do physically , you can do virtually.   We will also be  to determine what you want based on transactions you have done  as well as analysis of  social media interactions. The whole war  going forward is going to be over who owns the customers.

ON FUTURE OF ATMs

ATM usage should reduce as requirement of cash reduces  and as e-commerce  activity picks up in the country. The customers are already using Internet  and mobile banking. In terms of transaction volumes, mobile banking has already gone up substantially.  If I have to classify ATM as a channel, it is more in the physical world than digital.  If I have to go to an ATM , then I can go to a branch as well. ATM is now being used increasingly for  communication especially offering customized messages on new product offerings suited to a particular customer. We have got all the analysis of customers at  our back end. We have the offers ready. So when you come to the ATM ,  the machine communicates with  the customers.

ON THE FUTURE OF  BRANCHES  

The area that the branches will cover will become larger and larger.  People feel safe in seeing a branch in their neighborhood.  The branches  will be more involved in acquisition, explaining complex products  and also servicing if there is a problem .  I believe the  majority of dealing  is going to happen online,. By  complex products, I mean  home loan , car loan where people need clarification or face-to-face dealing.  You must understand that every customer is different. Some people want branches. Branches will become smaller in due course. Take for instance , we now have two man branches in the rural and semi-urban areas.

ON PEOPLE iNTENSITY IN BANKING

Certainly, people intensity in banking will reduce as digital banking grows.  The  human contact will come down.  Once you introduce  digital signature , which is valid, the people can send documents online.

ON BENCHMARKING PERFORMANCE GLOBALLY  

Wells Fargo is a good example for cross sell as well  as virtualized banking. There is a Bank Mandiri in Indonesia , which is very good for the small ticket items loans.  There are banks in Hong Kong like Hang Sang Bank  which  are very good in terms of returns. So depending upon each segment, we compare ourselves with whoever is the best in class.

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