The Telegraph
Monday , April 28 , 2014
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Growth poised for rebound, inflation a worry

- HDFC Bank chief believes there is ample scope for investment even at current levels of interest rates. Financial inclusion, he insists, is about sustainable livelihood and not just opening accounts

Aditya Puri, managing director of HDFC Bank, needs no introduction to those in the world of finance. He has played a key role in not only taking the bank to the position that it holds today but also ensuring a solid and consistent performance on crucial parameters such as net profit growth and asset quality. Puri spoke to Vivek Nair of The Telegraph shortly after HDFC Bank set a Guinness World Record for organising the largest single day blood donation drive with 61,902 participants. Some excerpts.

To begin with, congratulations on the accolade. Could you throw more light on the whole drive?

Firstly, HDFC Bank and its employees are committed to being good and responsible corporate citizens. We do believe that we want to give back to society and the basic thought here is that we must scale it up and that it should be sustainable. This started as an initiative about seven years back and then we collected 4,000 bottles. Then the employees and the bank felt that this is a crying need in India (the shortage of blood). We tied up with blood banks, hospitals, Red Cross, colleges and we collected 90,000 bottles of blood, of which over 61,000 was in one day. More importantly, I did not give any mandate, this was their (employees) own drive and now the employees say that they will do 100,000 bottles next year.

What are the other sustainability initiatives that HDFC Bank is taking?

We are doing some major work when it comes to skill creation. In semi-urban and rural India, in the age group of 25-45, there is a large section of people who are not educated, they do have skill, but they do not know how to exploit this commercially.

We tell them where to procure raw material, we provide them training on financial literacy, which includes how to maintain the accounts. We also help them with market linkages, savings instruments and by providing loans. We have already done 2.2 million families and over the next three to four years, we want to do 10 million families.

We have taken all our products into the interior of the country and even in the smallest places, you will find HDFC Bank providing financial services to people who were previously going to money lenders. HDFC Bank has done this for over a million people and we want to scale this up further.

Speaking of financial inclusion, or rural banking, HDFC Bank like others have made good strides on this front. However, is it profitable?

It’s a loss. Financial inclusion for us is not merely opening up of accounts or financial access, but sustainable livelihood. But, first you have to make the leap of faith. However, I am sure that my sustainable livelihood theme will turn profitable in the long run. If you go to the interiors, where 60 per cent of our population live, you will find that HDFC Bank is one of the best known financial brands. We have so far done very good work and I am confident that we will capture the market in the long run.

What is your take on the domestic economy?

Our own economist’s view is that this year, we will record a GDP (gross domestic product) growth between 5.2 per cent and 5.5 per cent and next year around 6 per cent. But I do believe that people are mistaking the noise of a democracy in transition with the vibrancy of India. The world is still very optimistic on India. I am also optimistic in that the problems have been identified and the government that comes in recognises what needs to be done. I do believe that we have probably seen the worst and we will see a gradual recovery.

But inflation continues to remain sticky.

As far as inflation is concerned, we must recognise that it has been persistent for the last 3-4 years and it is something that has to be controlled. But my own view is that we are making too much of interest rates and monetary policy as the panacea of all problems. I think, if we sort the rest of the issues, even with this interest rate, we will have revival of investment.

What are your views on the recommendation of the Anand Sinha committee that banks should formulate their base rate after taking into account their marginal cost of funds?

Marginal cost is a concept that if we apply in India before the maturity of the financial system in terms of having a vibrant debt market and a government yield curve will result in pricing of the assets, which may not be affordable and could affect growth.

One question on your leadership and management style. What is the secret behind your success?

Clearly, the success of HDFC Bank is a function of the management team and the employees and not just me. My own management style is collegiate. I am the first among equals and it is based on results and I empower. There is a difference between empowering and delegating. I allow them to take their decisions in their respective jobs, so very clearly we have responsibilities defined. We have a vision that may be I have a disproportionate view on, but then we have strategy, which is formulated within that vision and then there is an execution where the senior management have a stronger role than me.