One of the few successful private Indian banks, HDFC Bank has just completed two years of its operations when its net profits doubled to Rs 40.50 crore and deposits increased by 87 per cent. While the bank is still too small to worry its competitors, it has ambitious plans. In a sensible move its has decided to target the middle-class consumers, something which most private and foreign banks have not yet done. It is banking on good service, latest technology and the HDFC brand-name to overtake the foreign banks. In an interview with Pranjal Sharma, HDFC Bank's managing director Aditya Puri explains how. Excerpts:

The private banks in the country seem to cater to only the top end of the market by ensuring that the minimum deposit requirement is Rs 50,000 or so. Is your bank also going targeting the same market?

I don't know about others. We have a minimum requirement of only Rs 5,000 as deposit in the bank. With this your get the ATM card and other services like telephone banking free. We will also start portfolio management advice to the customers in another six months. There will be all the services of a foreign bank for no extra charge. We are a middle segment bank or you can say we are a middle class bank. We have a low deposit so that we can go can go for high volumes. To manage the volumes we have invested in technology. So the incremental volumes will not cost us that much. We have introduced different ways of dealing with the clients. They can deal with us on the telephone. They can deal with us on the ATM and of course come to the branch. Whereas the other banks including foreign ones portray the extra facilities a prestige issue, we have turned the whole concept on its head. Telephone banking is actually cheeper for me and more convenient for the consumer.

How does that happen? The general impression is that telephone banking is more expensive for the consumer and the bank.

It is very simple. Lets take a branch. If I did not have telephone banking, if I did not have home delivery and I didn't have centralised processing. This branch would have to be four times its size. It would require more personnel to deal with the customers, the lobby should be large enough to accommodate many customers at a time. If I have telephone banking, 30 per cent do their transactions on the phone and do not have to come to the bank at all. So my overall cost of dealing with a customer is much lower.

Do you think you can give serious competition to the foreign banks?

Serious competition is an understatement. In the long run I will have the market. The foreign banks have certain restrictions (there are limits on the number of branches a foreign bank can have). In the long run, if you want to be in the consumer banking business, it will have to be volume business. The success depends on the number of clients you have. You just need a clear focus and keep your costs in control.

How much have you invested in technology?

We must have invested upwards of Rs 25 crore in technology. This is where our emphasis is. And we have put our money where our mouth is. A customer can operate his account from anywhere in the country thanks to our technical network.

What are your expansion plans?

We started with the metros and then went to the mini-metros. Then we will move to the smaller towns. We have 28 branches today. We will have 40 by March. And we will probably have 75 in an year across the country. These will cover at least 25-30 cities. This will cover a large part of the urban and semi-urban population. And this is the population which will want products and services like ours. It is difficult for me to go into the rural areas just now because I need on-line connectivity. I need 24 hours power, I need better telecom services. As the infrastructure expands, so will we. It is not as if we do not want to go into the interior.

Is there a plan through which your bank will try to convert the people who have borrowed from HDFC to become your depositors too? There are about 1 million borrowers of HDFC.

There is no separate plan. It is a natural process. Sooner or later this 1 million will become our customers. If will take a little time. If somebody comes here and asks for a hosing loan, we refer him to HDFC. We have done the pre-screening and he gets the loan. And if somebody goes to HDFC for a loan and also asks for banking facilities, he is referred to us. Not only HDFC, but also with Countrywide Finance. If someone wants a consumer durable loan, we direct him to Countrywide where he gets preferential treatment. HDFC is also planning a foray in insurance. Once that happens, our bank's branches will also sell insurance products. We will also go into mutual funds. I see a stage where we will sell our mutual funds and sell other mutual funds as well.

Where do you see HDFC Bank in the next ten years?

We plan to be in the top three in every area we compete in. In five years, not ten years. In the corporate banking segment we are in the first three already. According to an independent survey, we are in the first three in foreign exchange dealing. We starter corporate banking first. For most of the top corporations we are the preferred bank.

Who will be your focus? Corporate customers or individuals?

Initially, corporate banking will be larger. Consumer banking takes longer time to develop. In the long run, corporate and investment banking will be 40 per cent of the business while consumer banking will be 40 per cent. We are also bankers to the National Stock Exchange and to the Over The Counter Exchange of India.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.