A Bank for the Buck

This is the story of the birth and growth of India’s most valued Bank – HDFC Bank Ltd – against the backdrop of the new bank movement in India that started in 1994 when the Reserve Bank of India opened up the sector to introduce competition and to force banks to be efficient and more productive.

A Bank for the Buck<br />Tamal Bandyopadhyay<br />Jaico Books<br />Price: Rs.395; Pages: 341
A Bank for the Buck
Tamal Bandyopadhyay
Jaico Books
Price: Rs.395; Pages: 341

There are some stories, which are just waiting to be told. The success of the HDFC Bank was one such story. Now we have Tamal Bandopadhyay, a senior financial who has done just that. ‘A Bank for the Buck’ tells the story of HDFC Bank, promoted by the HDFC, a household name in the field of housing finance. In 1991 India decided to adopt the New Economic Policy’ [NEP] doing away with the Nehruvian era of ‘Licence-Permit Raj. It meant competition in hereto protected fields like banking and insurance.

Many rushed to the Reserve Bank of India [RBI] with their applications to start a bank. Deepak Parekh, chairman and managing director of HDFC was one such person. Parekh is a well-known name in today’s corporate India. He is the one to take HDFC to new heights, a unique venture started by his late uncle Hasmukhbhai Parekh.

Deepak knew that though he understands finances, banking is a different ball game and he must hire the top-notch professionals. His task was half-done when Aaditya Pure agreed to lead the new bank. Tamal has penned this story in a lucid manner, bringing in required amount of suspense and intrigue. Hiring top people in any industry is quite a job. There are head-hunters, there are hard negotiations.

Deepak’s bait was to launch a brand new bank and nurture it to success and in the process, reap the benefits. This bait worked as all good managers always love challenges. Rather working for Citibank or American Express and do routine work, it is always challenging to build something new. All those professionals who joined the HDFC Bank with stock options are laughing all the way to the bank.

On 30th August 2012 the HDFC Bank completed 18 years. This is the right time to look at the bank and its achievements. Tamal has marshalled all his information and put it together in 13 chapters. As he mentions it all began in February 1994 in Malaysia when Deepak called up Aditya Puri, CEO of the Malaysia operations of Citibank N.A. Deepak straight came to the point and invited  Aditya to head new bank. Aditya agreed and then put a winning team together.

This phase was full of ups and downs. It was not only about getting right people for right job, but also involved decision about bank’s name, logo, etc. Should its name be HDFC Bank or something else? Should it be allowed to ride on the name of parent organisation HDFC? The road ahead was by no means smooth. At every stage, there were glitches. But then smart management knows how to get around these problems.

Once bank was set up, it was time to get business. But then HDFC Bank has a different culture. As Tamal notes, “It is risk-averse bank. It takes time to decide.” Its forte was prompt delivery and designing products to suit customer needs. Later it grew with some acquisitions like Time Bank. The author comments, “The merger of Times Bank with HDFC Bank was a landmark deal in the Indian banking industry in many ways. It was the first friendly merger in the banking space and the first done through the share swap route.” Then came Centurion BoP. Both these mergers gave the HDFC Bank a wide branch network and some good clients. By 2012, HDFC Bank has the biggest retail portfolio in India, though ICICI Bank had the spotted the opportunity ahead of it and went headlong into the field.

This, however does not mean that it is ‘roses, roses all the way’ story. Tamal has discussed this in ‘warts and all’. First came during the derivative crisis. In April 2011, the RBI penalised nineteen banks for their role in the derivate saga and HDFC Bank of one of them. HDFC Bank was fined Rs.15 lakh. Then there was the IPO scam, which came to light in April 2006. The SEBI commented,’ It emerged that HDFC Bank had failed to exercise due diligence and has opened demat accounts in the name of fictitious/benami entities. Tamal notes, ’The HDFC Bank learnt some hard lesson and made some systemic changes’.

In the last leg of the narrative, Tamal has profiled Aditya Puri who joined the bank on 12 September 1994.  ‘Puri is an earthy Punjabi who does what his heart tells him to do’ is how the author sets the tone. Banking runs into his blood. His grandfather Shambhu Lal Puri was on the board of the Reserve Bank in British India. Shambhu Lal’s brother K R Puri was the 12th governor of the RBI.

No wonder Aditya took to banking like fish to water. Aditya has no airs. He does not mind eating vada pav at the roadside eatery. Like a good, balanced journalist Tamal also quotes some people who have different opinion about Aditya.  At times he can be abrasive. Quite often he does not call a spade a spade. There is one important comment, which needs to be taken seriously.’ It is not clear how well the bank treats its people below a certain level. There is a core top management team that is well taken care of. But outside it’s a factory’ (page 288).

Despite these, the bank is growing by leaps and bounds. The story of the HDFC Bank has been well told with all the drama inherent is such stories. It is worth a read.


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