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HDFC Bank CEO designate Sashidhar Jagdishan
HDFC Bank CEO designate Sashidhar Jagdishan

Non-performing assets can widen up to 2%, says HDFC Bank’s CEO-designate

Semi-urban and rural areas will continue to be a large market opportunity for HDFC Bank, according to Sashidhar Jagdishan

MUMBAI : HDFC Bank CEO-designate Sashidhar Jagdishan said the bank’s gross non-performing assets (NPAs) on account of the loan moratorium could widen from the current 1.36%, but will still be below the 2.08% seen during the 2008 global financial crisis.

In a conference call with analysts, Jagdishan said the bank is confident of containing NPAs—loans that haven’t been serviced for at least 90 days—to low levels despite 10% of the loan book being under moratorium.

“Salary credits are at 98% of the pre-covid levels. So there could be some problems in 2% of customers," he said.

However, Jagdishan added that the current floating provisions of 50-60 basis points will be sufficient to protect the bank from the impact of the pandemic. If needed, the bank is prepared to provide more against NPAs which may arise, he said.

Jagdishan also made it clear that as the impact of pandemic continues, there will be demand for credit from low-rated customers who will need support to manage their finances. However, HDFC Bank will continue to maintain its risk standards.

“We will cater largely to the top 20-25% of the customers in semi-urban and rural areas. We still believe there is a 6-7% of loan market share up for grabs without diluting the risk standards," he said.

That said, semi-urban and rural areas will continue to be a large market opportunity for the bank. The loan deposit ratio in rural markets is just 30-35% and it is a growing market for the bank, he said.

Creating a digital ecosystem and monetizing it will be one of the key agendas for the incoming CEO over the next two years. The bank is trying to create a digital ecosystem and cross sell like China’s Ping An Bank. For this, the bank is partnering with one of the leading health chains and car dealer platforms which facilitates customer transactions, he said.

On the recent restrictions placed by the Reserve Bank of India on opening current accounts for customers who have availed cash credit or overdraft facilities, Jagdishan said it is likely to have a neutral impact.

While the bank may see a short-term compression in working capital requirements from small and medium enterprise customers, it expects larger opportunities from retail customers.

Jagdishan also addressed concerns raised by analysts on the recent controversy over the lawsuit filed by Rosen Law Firm against the bank. He said the management is confident there is no wrongdoing and that the bank has taken swift action against the people involved in wrongdoing in the auto loan division.

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