HDFC Bank will add 1,200-1,300 branches a year over the next two financial years on the back of similar expansion in FY23.

In an interaction with businessline, Kaizad Bharucha, Executive Director, observed that while customers have taken to digital banking channels in a big way, it is still important to have branches, especially in tier-2, 3 and 4 centres, to cater service requirements and garner deposits.

Bharucha said he is cautiously optimistic about the banking system’s FY24 credit growth, which is expected to be 12-13 per cent against 16-17 per cent in FY23.

Excerpts from the interview:


How will the composition of your loan book change after HDFC is merged with your bank?

Historically, we have always had a loan mix of 45:55 between wholesale and retail. During the Covid years, this altered to 55:45. Obviously, during this period, people were not borrowing and the bank was conservative. So, there was no discretionary spending… But, in the meantime, the wholesale engine was moving. The good part is that we never had any compulsion to grow one or the other segment. We are a play on the economy and therefore well-positioned across wholesale and retail segments. 

The home loan piece (from HDFC) helps alter the loan mix back towards retail.

We continue to ensure that we work all the lines of business in a prudent manner and not do anything which is fancy.


Why are you expanding your branch network when rivals swear by ‘phygital’ presence?

We have been investing in our distribution over a period of time and we continue to invest. In the first nine months of FY23, we added 841 branches (taking the branch network to 7,183 as at December-end 2022). We will close the year with 1,200-1,300 branch additions. We will add similar numbers (1,200-1,500 branch additions) over the next two years as well. This will ensure that we are able to provide banking services in Tier-2, 3 and 4 centres and also generate liabilities. The customer feels confident of the service and will engage with us even more. We want to get a higher share of the wallet of our customer base… There is an opportunity (after the slack in branch expansion during the Covid period). Digital combined with physical presence will serve our customers’ needs well. We can provide a bouquet of products and services.


Why is your wholesale loan book still skewed towards working capital?

Initially, our borrowing was skewed towards working capital. But, over a period of time, given our size and the opportunity available, we started participating in the term space, including infrastructure. We cannot be away from this. This does reflect in the altered composition of our wholesale book.

Having said that, a dominant part of our wholesale book continues to be on the working capital side.... but we have grown our term-loan book with a glide path. We continue on the path, whether it is participating in certain HAM [hybrid annuity mode] projects related to roads or transmission projects....


Will deleveraged corporate balance sheets herald a new credit cycle?

Corporate balance sheets have deleveraged significantly. They have become stronger. You are now starting to see a new credit cycle. We are coming into this position after a long time… In my conversations with my clients, they tell me that there is an order book which is good… We are cautiously optimistic. But we have to keep in mind the global scenario — there are headwinds across global markets. The pundits are telling us that there could be shallow global recession. So, there could be some imported effect. But the consumption story in India continues. The banking system will end FY23 with a credit growth of 16-17 per cent. Next year (FY24), the system credit growth could be 12-13 per cent, adjusting for previous year’s base effect.


Post consolidation in the public sector banking space, how do you see the competitive landscape?

To be honest, I think, both (public and private sector banks) have an important role to play in the economy. It is just that, at a point in time, there were some challenges in the public sector bank balance sheets, which have now abated. They are now very healthy. They are really in the market, competing full steam with stronger balance sheets.