HDFC Bank Doubles Mid-Corporate Loan Book In Three Years
Customers at a HDFC Bank branch in New Delhi, India. (Photographer: Amit Bhargava/Bloomberg News)

HDFC Bank Doubles Mid-Corporate Loan Book In Three Years


HDFC Bank Ltd. has more than doubled its mid-corporate loan book to over Rs 90,000 crore in the past three years, making it arguably the largest player in the segment.

And if the bank maintains its Q1 2019-20 loan growth rate of 21 percent in the second quarter as well, which analysts see as quite likely, then it will race past the Rs 1-lakh-crore milestone by September-end itself.

Mid-corporates are companies with an annual turnover of Rs 200-1,000 crore. The bank tags them as the emerging corporate book.

According to HDFC Bank’s June-quarter balance sheet, out of its Rs 4.07 lakh crore wholesale banking book, mid-corporate loans accounted for Rs 90,000 crore. This figure stood at about Rs 45,000 crore in June 2016, a senior bank official said.

Of the Rs 90,000 crore in mid-corporate loans, about Rs 7,000 crore is in debt papers (mostly commercial papers and non-convertible debentures) while 70 percent is in working capital loans, the official said.

At the overall industry level, around 15 percent, or Rs 9 lakh crore, of the Rs 60 lakh crore wholesale loan book are mid-corporate loans.

What is significant is that it's not only the bulging loan book where HDFC Bank leads the industry. It’s geographical coverage of the mid-corporate sector is also the most expansive.

The bank has 180 relationship managers, servicing over 3,500 mid-sized companies, across 49 cities in India. Three years ago, the bank catered to half that number in 18 cities. In the next couple of years, HDFC Bank plans to expand this clientele to at least 10-15 cities more, the official cited above said.

Nirav Shah, country head for emerging corporates group at HDFC Bank, attributes the faster pace of growth to a sharper focus and holistic approach that the bank offers to the mid-corporates.

"Banking today is no longer about just supplying credit. We don't believe in that either. We offer tailor-made solutions to each of our clients—be it in helping them better manage cash, supply chains and logistics or even in book-keeping, forex advisory and hedging—we offer all these services for free. I think this is what has helped us grow faster than the industry," said Shah.

Customers today are looking for value-addition and not just loans, "which we offer, helping us become the most penetrated banker in this segment today". The average ticket size of these loans is Rs 40 crore with tenor of 5-7 years, he added.

According to Shah, industrial credit in the banking system has been growing at 6-7 percent for the past many years, but for HDFC Bank, this has been at over 20 percent.

He, however, refused to offer a guidance citing management policy. "All I can tell you is that we will grow much faster than the industry in every segment of our business, including mid-corporates.”

Also read: HDFC Bank Sees No Risks To The India Consumption Story, Yet

On the asset quality front, Shah said HDFC Bank is the only lender that has not been affected by the bad-loan pain in all these years. In fact, the bank’s NPA ratio in the mid-corporate segment is substantially lower than the 1.4% in the overall loan book, as on June 30, he said.

"This is in spite of the fact that over 85 percent of these companies are privately held, and more than 90 percent of them are rated ‘AA’ and below. I don't think there is a single ‘AAA’-rated client we have in this segment at all. But of course none of these 3,500-plus are ‘B-’ and below," Shah said.

On Wednesday, HDFC Bank shares rose 0.03 percent to Rs 2248.85 apiece on the BSE while the benchmark Sensex gained 0.34 percent to end the day at 37,270.82 points.

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