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HDFC Bank's Cautionary Approach to Retail Loans Amidst the Pandemic

Strategic Insights

— 2 min read

HDFC Bank's latest financial results reflect the lender's cautious approach to retail loans as the second wave of the pandemic continues to pose significant challenges. The bank's overall retail loan book shrunk from ₹5.27 lakh crore in March 2021 to ₹5.23 lakh crore in June, primarily due to a decline in credit card outstandings, auto loans, two-wheeler loans, and loans against securities. Despite this, the bank is optimistic about the personal loan segment, with its head of retail assets expecting good growth in the future.

Key Takeaways:

  • HDFC Bank's retail loan book shrank from ₹5.27 lakh crore in March 2021 to ₹5.23 lakh crore in June 2021, with a decline in credit card outstandings, auto loans, two-wheeler loans, and loans against securities.
  • Credit card outstanding decreased to ₹60,429 crore in June from ₹64,674 crore in March due to a drop in revolving credit, with HDFC Bank's CFO Srinivasan Vaidyanathan stating that three-fourths of credit card customers have deposits that are on average five times the credit card outstanding.
  • The bank is focusing on the quality of credit and has seen a return of buoyancy in the personal loan segment, with head (retail assets) Arvind Kapil expecting good growth in the future.
  • HDFC Bank has completed an audit of its IT systems as required by the RBI and is waiting to hear from the central bank regarding the resumption of new card issuance.
  • The bank's card-acceptance business is rapidly growing, with 2.3 million merchant-acceptance points and a 50% market share of merchants being onboarded for card-acceptance as against 40% last year.
  • HDFC Bank's chief credit officer Jimmy Tata stated that staff had been rapidly getting infected during the second wave, leading to a halt in recovery calls and work-from-home arrangements.

Statistics:

  • HDFC Bank's retail loan book shrunk from ₹5.27 lakh crore to ₹5.23 lakh crore between March and June 2021.
  • Credit card outstanding decreased by ₹4,245 crore from ₹64,674 crore in March to ₹60,429 crore in June 2021.
  • HDFC Bank has 2.3 million merchant-acceptance points and a 50% market share of merchants being onboarded for card-acceptance as against 40% last year.
  • 75% of credit card customers have deposits that are on average five times the credit card outstanding.

Sources:

  • HDFC Bank's conference call with analysts after the bank's results for the first quarter of the current fiscal.
  • HDFC Bank's chief financial officer Srinivasan Vaidyanathan's statement.
  • HDFC Bank's head (retail assets) Arvind Kapil's statement.
  • HDFC Bank's chief credit officer Jimmy Tata's statement.

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