A Bank for the Buck by Tamal Bandyopadhyay

 

The book is an India based publishing detailing the story of how HDFC bank was formed in 1994 and established its banking operations since 1995 step by step. There is unequivocal acceptance of the fact that HDFC Bank and the group of HDFC financial companies are the most well run banks in India and is substantiated by their stock performance. HDFC Bank stock has returned annualized return of 27% since IPOed in 1995 which would mean the stock has multiplied by more than 100 times during the last 23 years. And all attributes to the top notch relentless focus by the HDFC management headed by Deepak Parekh as Chairman and Aditya Puri at the helm as MD and CEO and the entire team.

This book is narrated in fun way like reading a story on how Deepak Parekh carried his pursuit and dream of creating India`s largest private bank from scratch. The first four to five chapters talks is really like watching a movie starting with how Aditya Puri was persisted to join at the helm by Deepak Parekh and that too with demand to shifting base to India in 1994. Also these chapters talk about how each executive was handpicked from multinational firms and banks to join HDFC bank. It harkens back to the India in 1990s when reading the first five chapters. Really miss the India in 1980s and 90s when cricket, Bollywood and Doordharsan ruled the roast and the author takes you to those sweet memories as backdrop in this narration.

Then arrives the startup reflection of the bank during its initial set up days highlighting the struggle and uncertainties in their business pursuit. The ‘Entire Pyramid’ chapter discusses the business philosophy of the bank and what makes it different from other banks. The meat of the book that brings the banking culture, acquiring capital to grow without negotiating on cost of funds, liquidity crunch in 1995 due to tight RBI mandates on CRR/ SLR, relentless focus on profitability from day 1 are covered in middle chapters 6-9. Another interesting aspect is the listing of HDFC Bank as American Depository Share (ADS) where the management overcame the listing demands of strict US Securities and Exchange Commission regulations.

Key lessons learnt from the book:

  1. HDFC bank success can be attributed to the unified culture of the top notch management with relentless focus on profitability
  2. They didn’t want to fret upon the bad assets and lose sleep. They had focused on Risk management from the beginning. Its well said in one of the chapters that “sometimes it is not only what one has done but what one has not done that can make a difference between failure and success”. This is especially applicable in 2017/2018 where all Indian Public Banks are inundated with Non-Performing Assets (NPA) and their books being worth nothing whereas HDFC Bank even today has negligible NPAs.
  3. Bank`s approach from beginning has been to leverage power of technology by creating networks reducing settlement time and to serve corporates and retail customers the best way. No public banks had ventured into technology in banking until then. Cutting edge technology and its best in class levers are still used by the bank to provide top-notch service its customer and corporates
  4. HDFC bank started as full-fledged corporate bank and transitioned to Retail focused bank to achieve the scale as well as to be on both sides of the banking business. It’s a great feat achieved by the bank beating vast and deep distribution networks of Indian public banks to garner the retail banking business share. The reason they could achieve this attributes to only single factor – Leverage the power of technology and disintermediating the distribution branches.
  5. Current Account/ Savings Account (CASA a term coined and became a popular dogma in Indian banking industry because of HDFC bank) share in the funds mix to maintain profitability was focused throughout their banking journey
  6. HDFC bank had merged with Times bank, Centurion BOP inspite of higher valuations just to get control of the wide spread branches these acquired banks had. How HDFC bank normalized the CASA differences, underwriting differences and how they maintained the overall risk averse culture is phenomenal even with large scale mergers and acquisitions.
  7. Overall there are only 4 factors that led to HDFC bank`s success – relentless focus on the profitability, Customer servicing, Technology and Risk management

Great narration by the author and worth the read!

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