HDFC Bank Rolls Out The Red Carpet For  Borrowers Ahead Of Festive Season
Pedestrians walk by an HDFC Bank branch in Mumbai. (Photographer: Kuni Takahashi/Bloomberg)

HDFC Bank Rolls Out The Red Carpet For Borrowers Ahead Of Festive Season

India’s largest private sector lender HDFC Bank Ltd. has rolled out a platter of special offers for retail borrowers ahead of the upcoming festive season.

Such offers, while not unique for this time of year, are being amped-up against the backdrop of a weak economy and a government push to improve access to credit. Over the past two weeks, Finance Minister Nirmala Sitharaman has met with bankers asking them to participate in efforts to push retail credit, including loan melas.

In HDFC Bank’s case, the ‘Festive Treats’ include tie-ups with over 1,000 retail brands that will offer discounts, cash-backs and extra reward points on both in-store and on-line purchases. The bank will also provide special offers on all banking products from accounts to credit cards, business loans, personal, auto and home loans.

Aditya Puri, managing director, HDFC Bank, told BloombergQuint that since the bank is a dominant player in the payments business it has the ability to tie-up with merchants. That, together with constant attempt to strengthen the bank’s brand and reach, are the driving factors behind the campaign.

This is diwali season, why not give you a deal you can’t refuse and bring some cheer into the market, Puri said.

Puri added that the bank is transforming from a brick and mortar institution to an omni-channel financial services firm.

“We are now positioned as a financial experience which allows you to deal with us in a friction-less manner. With our mobile-app customers can do their banking, loans, bills and also shopping in a safe manner. We are not in the retail business but we can provide a safe way to shop,” Puri said.

For small-businesses, the bank is slashing its processing fees by 50 percent for business loans which could save around Rs 45,000 on a loan of over Rs 50 lakh for the customer, the bank said.

These offers, while boosting spending by the bank’s customers, could also lead to improved growth in HDFC Bank’s retail and small business loans portfolio.

Rise In Consumer Leverage?

A recent slowdown in consumption demand has prompted economists to question whether a decline in household financial savings and an increase in leverage over the last few years is starting to hurt the consumer economy.

Puri, whose bank is the biggest private retail lender in the country, does not believe so. The rise in individual consumer leverage is not a systemic-issue, he said.

“Obviously you have to take into account what is good for both the customers’ benefit and yours [the banks’] as to how their leverage is. If their individual leverage goes up they should not get any more loans,” Puri said. “We do not want to land up in a situation where the customers do not pay and spoil their credit record,” he added.

Speaking to reporters, Puri said that the bank has not loosened its credit standards and has not compromised on credit-quality whether it comes to salaried or non-salaried customers.

Also read: BQ Explains: How Lending Rates Linked To An External Benchmark Will Impact Borrowers And Banks

The Move To External Benchmarking

From Oct.1 the Reserve Bank of India has mandated that all banks tie their floating-rate retail and SME loans to an external benchmark.

Puri said that HDFC Bank does not have any floating-rate loans in its personal loan and business loan portfolio, adding that the lender’s margins will not be impacted by the the new regulations.

Asked about whether the bank would launch floating-rate loans in the coming months, Puri said there is little demand for such products. “Globally at the lowest point of the interest-rate cycle people want a fixed-rate not a floating-rate loan.”

He also does not see floating rate deposit products pick up in India.

Many people depend on bank interest for their day-to-day expenditures. So they would not like a floating-rate deposit. We tried it, we will try it again. But I would say the chances of success floating your granular liabilities is limited, although banks may be able to float their wholesale liabilities
Aditya Puri, Managing Director, HDFC Bank

Also read: How Banks Will Manage Interest Rate Risk Once Loans Are Linked To An External Benchmark

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