By Bibek Debroy
In urban India, it’s difficult not to find an HDFC ATM, though HDFC didn’t start off with a retail banking focus when it was first incorporated in 1994 and promoted by HDFC (Housing Development and Finance Corporation). It’s one of India’s largest banks and the largest private sector one — precise ranking depending on how you define “large”. In addition to the first private banking licence from the Reserve Bank of India (RBI), high points have been the merger with Times Bank in 2000 and the acquisition of Centurion Bank of Punjab in 2008.
Among those who read business papers, rare will be the person who has not read Tamal Bandyopadhyay’s columns. The author states, “The transition from writing a 1,000-word weekly column in a financial daily to writing a book is like a T20 cricketer going to play a test match.” But, I am not sure that’s quite right, because the style of the book, across its 13 chapters, is very T20. It’s peppered with personal anecdotes based on conversations, and is more about the people behind HDFC rather than the bank itself. In the process, an account of how HDFC was set up, and prospered, also emerges.
Each reader will have a preferred anecdote. Mine is this: In 1995, the then Finance Minister Dr Manmohan Singh was invited to inaugurate HDFC Bank. Because of imminent elections, a formal inauguration was scrapped. However,
Dr Singh did come, with Dr C Rangarajan, the then RBI governor. Dr Singh was impressed with computerisation and ATMs. “The bank had prepared dummy ATM cards in the name of Singh and Rangarajan. While demonstrating how an ATM worked, Ram (the bank’s technology head) inserted the card with Singh’s name into the machine and punched in the keys. The ATM instantly flashed a message indicating insufficient funds,” he writes. Soon after, the ATM machine swallowed the bank’s managing director’s ATM card. There is another priceless anecdote about how training sessions and bank meetings were held under a peepal tree in the Kamala Mills premises, since the office initially had no meeting rooms. Or, sample this. “At Pimpalgaon, once a villager came and asked me [Aditya Puri] how much loan the bank can give against gold. He wanted Rs 5 crore.”
Perhaps inevitably, the book is kind to HDFC and rarely critical. “ICICI Bank, India’s largest private lender, and HDFC Bank, the second largest in terms of assets but ahead of ICICI Bank in terms of market value, are as different as chalk and cheese in their approach to banking. ICICI Bank is flamboyant, innovative and quick as a flash when it comes to seizing an opportunity. HDFC Bank is staid and waits for opportunities but emerges a winner at the end of the day. In many segments, HDFC Bank learns patiently from the experiences of others before it steps into a new business, whereas ICICI Bank loves playing the pioneer. The ICICI Bank stock is volatile; HDFC shares are range-bound. The same applies to earnings. ICICI Bank is often unpredictable, both surprisingly and shockingly. HDFC Bank is monotonously predictable on most financial parameters.” Since this is about people rather than the bank, that positive bias is acceptable and a broader story of corporate governance, professional management and non-interference by the board and the promoter does emerge, transcending the immediate focus on a bank.
Two of the more interesting chapters (9 and 10) are about the two mergers. “The dramatis personae involved in Times Bank’s merger with HDFC Bank in 2000 also tell us different stories. Or different pieces of the same story. They are no less dramatic than Kurosawa’s Rashomon. Collectively, they present the big picture of the most fascinating merger in Indian banking history, complete with the minutest details.” The Centurion Bank of Punjab merger was slightly different, “the biggest gamble that the normally risk-averse bank has ever taken”. As you would have gathered from these quotes, this is a very readable book. It helps if one can identify with the individuals mentioned, not inordinately difficult, because the book has been published in 2013, and not 50 years down the line. Indeed, 50 years down the line, it would have been difficult to reconstruct the story, since it is based on personal conversations and not published information. In terms of writing India’s economic, or business, history, this is a relatively new, unexplored and rare genre, which makes it all the more valuable. It’s not an easy genre to replicate. One not only needs the knowledge, one also needs the personal access. Both are rare traits.
Having said this, the 13 chapters aren’t unstructured. The first four are about setting up the bank. The next four are about HDFC Bank’s banking philosophy. Then there are two chapters on the mergers. Despite what I have said about an overall sense of pro-HDFC bias, there is a chapter on warts and penalties imposed by the RBI. There’s one chapter on Aditya Puri. If there is one chapter that left me dissatisfied, that’s the last and concluding chapter, titled, “Whose Bank Is It Anyway?” Otherwise, this is a well-written and eminently readable book.
A BANK FOR THE BUCK
The new bank movement and the untold story of the making of India’s most valued bank
Jaico Publishing House
xxxii+343 pages; Rs 395