How HDFC Bank's Is Transforming Into A Fintech Giant!
Business Today|October 17, 2021
A behind-the-scenes look at how Sashidhar Jagdishan, the new MD and CEO of India’s largest private sector lender, is trying to transform the bank into a technology company with a banking licence.
Anand Adhikari
For fifty-six-year-old cricket buff Sashidhar Jagdishan, the entry into the eighth-floor corner room of HDFC Bank’s Mumbai headquarters amidst the raging Covid-19 pandemic was like walking into the Sabina Park cricket pitch in the 1980s and facing a battery of West Indian fast bowlers. That’s how the new MD & CEO of the country’s second-largest bank often recounts his gruelling first 11 months to friends and acquaintances. The man whom iconic CEO Aditya Puri trained and tutored as his successor, faced a barrage of bouncers—technology glitches, disruption in banking services, a credit card acquisition freeze by the regulator Reserve Bank of India (RBI), an embargo on new digital product launches, compliance failures, a hefty penalty by the regulator, and the most challenging economic environment in the bank’s history. Jagdishan (fondly called Sashi by colleagues and friends), was often seen dousing fires working from home, and also taking care of his old parents.

But there was another story brewing that got lost in the din. Taking fresh guard, Jagdishan, who joined the bank as a finance manager in the mid-1990s, was constantly brainstorming with his senior management team to use the current taxing phase as an opportunity to start with a clean slate—especially the technology platform. Despite being an insider, Jagdishan discovered a frightening gap between what he knew about the bank over the shoulders of his predecessor, and what he encountered sitting in the hot seat himself. Part of the reason was the pandemic, which swiftly changed customer behaviour, forced a remote workforce culture, tested the bank’s business continuity plan, and also raised fears of cybersecurity risks.

The new job at hand was all about future-proofing and rewriting many old rules of running a bank. “My respect for Puri has gone up infinite times [considering] how he had steered the ship seamlessly,” Jagdishan once told a colleague. Under Puri, the start-up bank, founded in 1994, grew its numbers to ₹90,084 crore in net revenues, ₹31,116 crore in profits, ₹13.35 lakh crore in deposits, and ₹11.32 lakh crore of advances in FY2020-21, when he retired. It was also the stock market’s darling. HDFC Bank’s outperformance in the past decade pushed the bank closer to the country’s toppers by market capitalisation—Reliance Industries and Tata Consultancy Services. For perspective, the stock would have minted ₹15.8 crore to an investor who put in ₹1 lakh in its IPO in May 1995. However, post-pandemic, HDFC Bank’s stock returns have barely matched the returns of the 30-share BSE Sensex index or even its arch rival ICICI Bank (see chart Measuring Up).

His close associates say Jagdishan is quietly determined to come back with a bang. The bank is working on a scaleable platform by benchmarking with platforms such as Amazon and Netflix, with no downtime. “We are creating two factories, two muscles, like the enterprise factory and the digital factory, to be able to build new architecture, new designs on the cloud, which will ensure that we are able to compete with the fintechs and the platform players. This is again a journey you will start to see. You will not see it overnight. It will start to happen in 12 to 15 months’ time and the whole thing will probably be unveiled in about three years’ time,” Jagdishan promised shareholders in a virtual annual general meeting or AGM in July. (Jagdishan didn’t participate in this story.)

The new platform is aimed at transforming the bank with 5,600-plus branches and 120,000 employees into a Neo Bank (or virtual bank) in the next two to three years. There would be a one-click auto loan where the customer could visit a dealer, test drive, and walk away with the car. Hundreds of fintechs would plug into the bank’s systems without worrying about tech compatibility. A tie-up with payments giant Paytm was already sealed in August to jointly storm the small merchants’ space in smaller towns and cities for buy-now-pay-later (BNPL) loans. There is a new rural strategy of riding piggyback on the 350,000 government-owned common service centres (CSCs) platform to capture the emerging middle class in smaller towns. There is also an ecosystem approach across geographies in under-penetrated segments like healthcare, education, the gig economy, and start-ups to capture savings, lending and investment opportunities (see box The Digital Banker). Seven months after taking over, Jagdishan has also reshuffled the portfolios of his senior management team to align with the new business strategy. To extend Jagdishan’s cricket analogy, he seems all padded up to play a long innings.

THE DIGITAL BANKER

HDFC Bank honcho Sashidhar Jagdishan is taking to digital transformation with evangelistic zeal. Here’s a peek into his strategy.

Shift from legacy IT infrastructure to global benchmarking against the likes of Amazon and Google

Multiple cloud strategy with scaleable capacity, which would be fail-safe and recover faster from outages

Create a neo bank in the next two-three years

Be ready for new open banking models; leverage tech stacks and account aggregators to tap new business

Restructure organisation with sharper focus on retail assets, MSMEs, rural business

Digital auto portal for car loans in minutes and new products like buy now, pay later

Partner with fintechs to grow in new areas; tie up with Paytm to jointly tap the small merchants segment for payments solutions and lending

Reduce product launch life cycles from years and months to a few weeks

Ecosystem approach to tap opportunities in healthcare, education, gig economy, and start-ups

Industry-first new products for corporates by way of alliances and partnerships

Remote working, hot seat concept

Call it changed circumstances or personality nuances, Jagdishan is turning out to be very different from Puri. The seamless succession without any senior management exit so far shows confidence in his leadership. “Puri was multidimensional, who led the bank right from the front, whereas the bulk of Sashi’s experience is as chief financial officer (CFO),” says V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services. Parag Rao, Group Head-Payments Business, Consumer Finance, Digital Banking & Information Technology at HDFC Bank points out that “CFOs have this unique advantage of not just managing finances, but also having an extremely deep, incisive, strategic view”. Jagdishan’s leadership skills were on display when he was quick to apologise to the bank’s over 60 million customers for repeated tech outages. In a conference call hosted by Macquarie Capital in May, Jagdishan said that the deficiencies on the technology front were a blot on the reputation of the bank. “No banker actually would have publicly made such an admission,” says a former HDFC bank executive. Two months later at the virtual AGM, Jagdishan dubbed the disruption from new-age fintech players as valid fear. “One can either sit and sulk or deal with it differently,” he had said.

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM BUSINESS TODAYView All

Money, Can't Buy You Love. But It Can Certainly Fulfil The Desire For The Finer Things In Life

Money, they say, can’t buy you love. But it can certainly fulfil the desire for the finer things in life

3 mins read
Business Today
October 31, 2021

How Reliance Brands Get Almost Every Well-Known Brand In Its Kitty And What's The Endgame?

Reliance Brands dominates the luxury business in India. How did it get almost every well-known brand in its kitty and what’s the endgame?

9 mins read
Business Today
October 31, 2021

CANALI ON CANALI

Stefano Canali, President and CEO of luxury menswear brand Canali Spa, talks about the India story and operating in a post-pandemic world

7 mins read
Business Today
October 31, 2021

'I AM A STRONG BELIEVER IN CASH FLOWS'

THE BIG BULL OF the Indian markets, Rakesh Jhunjhunwala, has had a mixed year. Even as the billionaire investor battled significant health issues including a debilitating bout of Covid-19, the performance of his stock portfolio has been nothing short of stellar.

10 mins read
Business Today
October 31, 2021

GOLD ON YOUR PLATE

Dubai restaurateurs are taking the city’s love for gold to a new level by offering dishes wrapped in edible gold

3 mins read
Business Today
October 31, 2021

FIT FOR ROYALTY

While you may not be able to splurge on international travel, live like a king at these luxurious hotel suites across India

5 mins read
Business Today
October 31, 2021

THE BUZZ RETURNS

There has been marked improvement in business sentiment as corporate leaders have overcome Covid-19 woes, finds the latest quarter’s Business Today Business Confidence Index. Industry is upbeat about the future and expects improvement in the overall economic situation

4 mins read
Business Today
October 31, 2021

THE KING'S ADDRESS

After a ‘lost’ year, luxury real estate is surging as the ultra-rich trade up to opulent city apartments or go green with villas in Goa, Alibaug and Kasauli

10 mins read
Business Today
October 31, 2021

‘TO ACHIEVE MASTERY, ONE NEEDS TO PUT IN A LARGE AMOUNT OF TIME'

ARUN K. CHITTILAPPILLY, MANAGING DIRECTOR, WONDERLA HOLIDAYS

1 min read
Business Today
October 31, 2021

A Jab Of Good Health

Covid-19 vaccinations have gathered pace in india. But with the virus mutating and new variants being discovered, next-generation vaccines may be the need of the hour. Where does india stand?

10+ mins read
Business Today
October 17, 2021