“Banks need to change every 3-4 years,” says Aditya Puri, the recently retired president of HDFC Bank, called “the best banker in the world”

  • HDFC Former CEO of Bank Aditya Puri thinks that banks should change every three to four years.
  • His comments come at a time when HDFC bank is currently under the scanner of the Reserve Bank of India (RBI) to re-evaluate its IT infrastructure.
  • Called “the world’s best banker,” Puri brought HDFC Bank into the digital age.

Suspension is part of any industry, and according to former HDFC Bank CEO Aditya Puri, banks have to change every three to four years to stay in the industry.

“We have to be a dynamic organization. We need to change every three or four years, ”Puri, called“ the best bank in the world ”by The Economist, told financial services company McKinsey.

Much of Puri’s fame, limited to India, stems from his risky approach to banking, which has led to small but steady returns, and yet he has managed to build an enviable franchise that is an HDFC bank whose market value today is ₹ 7.9 lakh crores ($ 107 billion).

“It’s a misunderstanding that you can price for risk. You can price for risk up to a point, but not beyond that. Otherwise, you will end up in the repressive crisis, ”Puri said, adding that investors called him bored at the time.

However Puri’s comments come at a time when HDFC Bank is having problems. Barely two months after its departure, the Reserve Bank of India (RBI) stopped the lender from issuing new credit cards and paused the launch of its next generation of digital services – Digital 2.0 – after a server outage on 21 November, which was only the latest in a series of interruptions.

More than 95% of HDFC Bank’s transactions are done through its digital services. The strategy behind this, under Puri’s rule, was to target the right market with the right technology platform and quantity filters.

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“Use technology to create value. I don’t see any reason why you would have a yield of equity less than 16% to 18%, “noted Puri. During the current fiscal year, HDFC Bank gave a 17% reduction on equity.

HDFC performance on par against industry averagesMcKinsey / BI India


The reassessment of HDFC Bank’s digital infrastructure
A bank earns money by lending to borrowers. So, it seems that when it comes to digital strategy, Puri has focused on borrowers instead of account holders. At least that’s what he talked about when questioned. “And as we went into it deeply, we found that we could give almost any loan in ten seconds, from the time the guy applied, to the time we credited his account. We could also provide much more convenient services. to merchants accepting payments by card, ”Puri said as he explained the origins of HDFC Bank’s digital journey.

And now, the majority of its account holders use the digital network for digital transactions, which is both good and bad.

Critics believe that an order like that of the RBI or repeated failures could have a greater impact on an HDFC bank, as most of its customers are online. For the State Bank of India (SBI), for example, only 50% of its general transactions come through digital modes. So a malfunction would theoretically only affect half of its volume.

The share price of HDFC Bank since January 2020BSE / BI Cheap

Other analysts believe that while the RBI circular may hurt the perception of HDFC Bank temporarily, the move will benefit the bank in the long run. Upgrading its IT infrastructure and improving its digital services will not only get it a green light from the central bank, but will also promote its customers in terms of more convenient baking.

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