After successfully completing the merger of its mortgage lender parent seven months ago, HDFC Bank is now strategically targeting customers of HDFC Ltd to expand its customer base. The technical and system integration required for this initiative has been completed, and starting in March, HDFC Bank will actively approach existing HDFC Ltd customers to encourage them to open savings accounts.
This outreach is part of HDFC Bank’s comprehensive plan to enhance its Current Account and Savings Account (CASA) base, aiming for substantial deposit growth. The bank has already commenced cross-selling activities since February, with a focus on converting existing customers into liability customers. HDFC Bank anticipates that by encouraging HDFC Ltd customers to open savings accounts, many of them will transition into liability customers, offering an opportunity to promote various other banking products.
“One of the biggest opportunities was to generate CASA and initial signs are encouraging. Pre-merger about 30% to 35% of incremental disbursals were to customers with an HDFC Bank savings account. This has reached about 80% of incremental disbursals, post-merger. The Home Loan Business for the Bank has become both an asset and liability generator and is growing sizeably. This leads to a higher stickiness quotient and a stronger customer connection with the Bank for a longer duration,” said Arvind Kapil, Country Head – Mortgage Banking, Home Loan, LAP, HDFC Bank.
HDFC Bank said that the CASA will increase and it will also help the deposit growth going ahead, reducing pressure on it to raise high-cost deposits to fund credit growth.
Home loan customers are recognised as significant contributors to the CASA segment. HDFC Bank believes that by successfully onboarding home loan customers onto its platform, it can create lasting relationships and unlock additional cross-selling opportunities.
Close to 70% of the customers of HDFC do not have an account with HDFC Bank while only 2% of the customers of HDFC Bank owned a product of HDFC. This allows the merged entity a huge scope for cross-selling their products and services.
Home loan business
HDFC Bank on Thursday said its home loan business experiences stable and healthy double-digit YoY growth for two quarters, ending December 31, 2023. The growth in sales turnover has come on the back of a wider distribution network The Bank’s market share has grown approximately by 18% to 20% on incremental disbursals, post the merger. It has exhibited robust and consistent higher double-digit, year-on-year growth across its Home Loan Business for the first six months, post the merger. On a sequential basis, the Bank has gained a leading position as it recorded a growth of 3.6% which was the highest amongst its peers in home loans.
“The bank’s fundamental strategy has been to improve the turnaround time of processing at the front end. Post-merger turnaround time has reduced to almost one-third. This coupled with the erstwhile HDFC Ltd’s strength of connecting with customers in person is a potential game changer in terms of both sales turnover and cross- sell,” he said.
Added to this strategy is a renewed focus on the self-employed segment which will further increase opportunity size, it said, adding that post-merger, the Bank has already launched and expanded its product basket through banking surrogates as well as GST programmes for better assessment of such profiles.
New products
Furthermore, HDFC Bank is set to introduce several new products in March, targeting specific customer segments. For self-employed individuals, the bank will launch a Banking Surrogate product, along with a GST product tailored to meet the needs of this demographic. Additionally, a home refurbishing product will be unveiled, offering customers a comprehensive solution for their home improvement needs.
“By mid-March, the bank will be launching a seamless straight through journey for Home Refurbishment Loans which can become a strong product offering for customers. Also, by April 2024, the Bank proposes to launch a Home Saver product. This will lay a robust foundation for a lucrative offering to existing and prospective home buyers. Despite a substantially larger book than peers, the Bank’s model is generating huge benefits on a monthly basis and its differentiated strengths are expected to generate substantial value for customers and the Bank in the future,” it said.
