Mumbai, HDFC Bank chief Sashidhar Jagdishan on Friday flagged funding as a risk for the lender after the successful USD 40 billion amalgamation with its parent. “As you know, the risks of the merger is the funding part of it,” Jagdishan told shareholders of the largest private sector lender at its maiden annual general meeting after the merger came into effect from July 1.
It can be noted that the bank has not been fully successful in getting all the forbearance it had sought from the Reserve Bank of India (RBI) on the liabilities front. The RBI refused to provide any exemptions on Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements on the deposits that come from HDFC, which was a deposit-taking entity.
Additionally, questions were raised about the likely impact on HDFC Bank with respect to the RBI’s move to put an incremental CRR of 10 per cent on deposit accretions in all the scheduled commercial banks after May.
Jagdishan exuded confidence that the bank will be able to surmount the funding challenge, pointing out that the board, senior leadership and staff are cognizant of the work at hand.
The Chief Executive Officer and Managing Director said the merger, and the timing, made sense because of the advantages that it offers, and added that the staff is “excited” to take on the funding challenge.
“I think time will tell but we’re extremely confident at the way that we have grown over the last 10 years, there is no reason why we will not be able to surmount the challenges and even grab the opportunity to grow similarly over the next many years,” he said.
The bank has sought shareholders’ approval to raise up to Rs 50,000 crore from bond issuances going ahead and will be active on this front as part of its liabilities management, Jagdishan said.
Merger with HDFC is all set to impact the Net Interest Margins (NIMs) of the bank because of the higher proportion of the low-interest yielding housing loans which get added, Jagdishan said, adding that the same will be visible from the results for the September quarter itself.
However, the housing loans also present advantages in terms of better repayment ratios which lower the credit costs on such advances, Jagdishan said.
The bank, which has always reported NIMs between 4-4.4 per cent range, is confident of getting the profitability or the returns back to historical levels in up to 18 months, he said.
“It’s been always a philosophy that we will not compromise growth for profitability,” Jagdishan said.
Amid some issues of misbehaviour by staff being flagged on social media, including a loud shouting by a senior employee to a subordinate for not meeting business targets, Jagdishan said employees’ satisfaction and organisational culture are priorities for the bank management and the board.
He also promised to publish employee satisfaction survey results along with the annual report from next year.
More than 7 per cent of the bank’s overall spending is towards technology, Jagdishan said.
He, however, said that more security features may lead to some inconvenience.
Meanwhile, the bank’s Non-Executive Chairman Atanu Chakraborty said erstwhile HDFC’s Chairman Deepak Parekh cannot join the board of the bank because of a RBI policy not allowing directors above 75 years of age.
Key executives Renu Karnad and Keki Mistry have joined the bank’s board.
Jagdishan said a request for approval has been made to the RBI for inducting erstwhile HDFC’s Chief Financial Officer V Srinivasa Ranjan to the board.
The bank scrip closed 1.05 per cent down at Rs 1,619.05 a piece on the BSE on Friday as against a 0.56 per cent correction on the benchmark.
