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The Housing Development Finance Corporation Limited was amongst thefirst to receive an ‘in principle’ approval from the Reserve Bank of India(RBI) to set up a bank in the private sector, as part of the RBI’sliberalisation of the Indian Banking Industry in 1994. The bank wasincorporated in August 1994 in the name of ‘HDFC Bank Limited’, with itsregistered office in Mumbai, India. HDFC Bank commenced operations as aScheduled Commercial Bank in January 1995.
HDFC is India’s premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
HDFC Bank’s mission is to be a World-Class Indian Bank. The objective isto build sound customer franchises across distinct businesses so as to be thepreferred provider of banking services for target retail and wholesalecustomer segments, and to achieve healthy growth in profitability, consistentwith the bank’s risk appetite. The bank is committed to maintain the highestlevel of ethical standards, professional integrity, corporate governance andregulatory compliance. HDFC Bank’s business philosophy is based on four corevalues – Operational Excellence, Customer Focus, Product Leadership andPeople.
As on 31st March, 2009 the authorised share capital of HDFC Bank is Rs. 550crore. The paid-up capital as on the said date is Rs. 425,38,41,090/- (42,53,84,109 equity shares of Rs 10/- each). The HDFC Group holds 19.38% ofthe Bank’s equity and about 17.70 % of the equity is held by the ADSDepository (in respect of the bank’s American Depository Shares (ADS) Issue).27.69 % of the equity is held by Foreign Institutional Investors (FIIs) andthe Bank has about 5,48,774 shareholders.
The shares are listed on the Bombay Stock Exchange Limited and The NationalStock Exchange of India Limited. The Bank’s American Depository Shares ( ADS) are listed on the New York Stock Exchange (NYSE) under the symbol ‘HDB’ andthe Bank’s Global Depository Receipts (GDRs) are listed on Luxembourg StockExchange under ISIN No US40415F2002.
On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was formally approved by Reserve Bank of India to complete the statutory and regulatory approval process. As per the scheme of amalgamation, shareholders of CBoP received 1 share of HDFC Bank for every 29 shares of CBoP.
The merged entity will have a strong deposit base of around Rs. 1,22,000 crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity would be over Rs. 1,63,000 crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower.
In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banks in the New Generation Private Sector Banks. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank.
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of 1,506 branches spread in 635 cities across India. All branches are linked on an online real-time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank’s expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base.
The Bank also has 3,573 networked ATMs across these cities. Moreover, HDFC Bank’s ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.
Mr. Jagdish Capoor took over as the bank’s Chairman in July 2001. Prior to this, Mr. Capoor was a Deputy Governor of the Reserve Bank of India.
The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years, and before joining HDFC Bank in 1994 was heading Citibank’s operations in Malaysia.
The Bank’s Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board.
Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength.
HDFC Bank operates in a highly automated environment in terms ofinformation technology and communication systems. All the bank’s brancheshave online connectivity, which enables the bank to offer speedy fundstransfer facilities to its customers. Multi-branch access is also provided toretail customers through the branch network and Automated Teller Machines(ATMs).
The Bank has made substantial efforts and investments in acquiring the besttechnology available internationally, to build the infrastructure for a worldclass bank. The Bank’s business is supported by scalable and robust systemswhich ensure that our clients always get the finest services we offer.
The Bank has prioritised its engagement in technology and the internet as oneof its key goals and has already made significant progress in web-enablingits core businesses. In each of its businesses, the Bank has succeeded inleveraging its market position, expertise and technology to create acompetitive advantage and build market share.
HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments:
The Bank’s target market ranges from large, blue-chip manufacturing companiesin the Indian corporate to small & mid-sized corporates and agri-basedbusinesses. For these customers, the Bank provides a wide range of commercialand transactional banking services, including working capital finance, tradeservices, transactional services, cash management, etc. The bank is also aleading provider of structured solutions, which combine cash managementservices with vendor and distributor finance for facilitating superior supplychain management for its corporate customers. Based on its superior productdelivery / service levels and strong customer orientation, the Bank has madesignificant inroads into the banking consortia of a number of leading Indiancorporates including multinationals, companies from the domestic businesshouses and prime public sector companies. It is recognised as a leadingprovider of cash management and transactional banking solutions to corporatecustomers, mutual funds, stock exchange members and banks.
The objective of the Retail Bank is to provide its target market customers afull range of financial products and banking services, giving the customer aone-stop window for all his/her banking requirements. The products are backedby world-class service and delivered to customers through the growing branchnetwork, as well as through alternative delivery channels like ATMs, PhoneBanking, NetBanking and Mobile Banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC BankPlus and the Investment Advisory Services programs have been designed keepingin mind needs of customers who seek distinct financial solutions, informationand advice on various investment avenues. The Bank also has a wide array ofretail loan products including Auto Loans, Loans against marketablesecurities, Personal Loans and Loans for Two-wheelers. It is also a leadingprovider of Depository Participant (DP) services for retail customers,providing customers the facility to hold their investments in electronicform.
HDFC Bank was the first bank in India to launch an International Debit Cardin association with VISA (VISA Electron) and issues the Mastercard Maestrodebit card as well. The Bank launched its credit card business in late 2001.By March 2009, the bank had a total card base (debit and credit cards) ofover 13 million. The Bank is also one of the leading players in the “merchantacquiring” business with over 70,000 Point-of-sale (POS) terminals for debit/ credit cards acceptance at merchant establishments. The Bank is wellpositioned as a leader in various net based B2C opportunities including awide range of internet banking services for Fixed Deposits, Loans, BillPayments, etc.
Within this business, the bank has three main product areas – ForeignExchange and Derivatives, Local Currency Money Market & Debt Securities,and Equities. With the liberalisation of the financial markets in India,corporates need more sophisticated risk management information, advice andproduct structures. These and fine pricing on various treasury products areprovided through the bank’s Treasury team. To comply with statutory reserverequirements, the bank is required to hold 25% of its deposits in governmentsecurities. The Treasury business is responsible for managing the returns andmarket risk on this investment portfolio.
The Bank has its deposit programs rated by two rating agencies – CreditAnalysis & Research Limited (CARE) and Fitch Ratings India PrivateLimited. The Bank’s Fixed Deposit programme has been rated ‘CARE AAA (FD)’ [TripleA] by CARE, which represents instruments considered to be “of the bestquality, carrying negligible investment risk”. CARE has also rated thebank’s Certificate of Deposit (CD) programme “PR 1+” whichrepresents “superior capacity for repayment of short term promissoryobligations”. Fitch Ratings India Pvt. Ltd. (100% subsidiary of FitchInc.) has assigned the “AAA ( ind )” rating to the Bank’s depositprogramme, with the outlook on the rating as “stable”. This ratingindicates “highest credit quality” where “protection factorsare very high”
The Bank also has its long term unsecured, subordinated (Tier II) Bonds ratedby CARE and Fitch Ratings India Private Limited and its Tier I perpetualBonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has assignedthe rating of “CARE AAA” for the subordinated Tier II Bonds whileFitch Ratings India Pvt. Ltd. has assigned the rating “AAA (ind)”with the outlook on the rating as “stable”. CARE has also assigned”CARE AAA [Triple A]” for the Banks Perpetual bond and Upper TierII bond issues. CRISIL has assigned the rating “AAA / Stable” forthe Bank’s Perpetual Debt programme and Upper Tier II Bond issue. In each ofthe cases referred to above, the ratings awarded were the highest assigned bythe rating agency for those instruments.
The bank was one of the first four companies, which subjected itself to aCorporate Governance and Value Creation (GVC) rating by the rating agency,The Credit Rating Information Services of India Limited (CRISIL). The ratingprovides an independent assessment of an entity’s current performance and anexpectation on its “balanced value creation and corporate governancepractices” in future. The bank has been assigned a ‘CRISIL GVC Level 1’rating which indicates that the bank’s capability with respect to wealthcreation for all its stakeholders while adopting sound corporate governancepractices is the highest.
Your Bank has had a track record of moderate but steady increases individend declarations for the last 10 years and dividend payout ratio in thelast few years has been in the range of 20-25 %. Your Bank’s dividend policyis based on the need to balance the twin objectives of appropriatelyrewarding shareholders with cash dividends and of retaining capital tomaintain a healthy capital adequacy ratio to support future growth. In linewith this policy and recognisation of healthy performance during 2007-08,your directors pleased to recommend a dividend of 85% for the year ended onMarch 31,2008 as against 70% for the year ended March 31, 2007. This dividendshall be subject to distribution tax to be paid by the Bank but will betax-free in the hands of the members.
After State Bank of India, which is unarguably the most widely used bank in India, both ICICI and HDFC banks are amongst the top Indian banks in terms of customer base, infrastructure and facilities provided and both have fairly succeeded in providing powerful Netbanking services.
The common do-it-from-home facilities that both these Netbankings provide to their customers are:
As a regular user of both these Netbanking facilities since last 3 years, I can say that the above services really do save me the bother of standing in queues at a local branch.
So far so good. Now the what’s-missing-by-whom part! A closer look reveals that both these vary significantly and that ICICI Netbanking is better than HDFC Netbanking by leaps and bounds in terms of facilities.
Here is a comparison of their services feature-by-feature:
Transfer of Funds: This is a major difference. ICICI Netbanking’s Funds Transfer facility is much more hassle-free as compared to HDFC’s Third Party Transfer (TPT) facility. The problem arises not in using the service but in applying to the service. The facility to transfer funds to yours or someone else’s account, at intra or inter-bank branch, comes readily with the ICICI Netbanking subscription. That is, the facility is ready to use and you just need to add-in the new beneficiary for making the first transfer.
However, HDFC doesn’t agree to this simplicity and requires you to apply to this service by filling up a hard copy of the Third Party Transfer Application Form and submitting it to any of their Bank branches or ATM. Now when we are striving for branch-less banking, this looks off-the-road to me. Moreover, user experiences say that the application is not processed promptly if you deposit the activation form at an ATM, and may cause further delays upto weeks. Hence, it is preferred to walk into the HDFC bank and talk to the representative for activation (walking is good for health seems to be HDFC’s hidden motto here!)
Applying for new Accounts: You can initiate the opening of a variety of accounts online through ICICI Netbanking by submitting an online request with the details. For certain accounts like the Recurring Deposits, the request gets completed without the need for you to visit the bank, and the newly created account is accessible at your next login upon approval. On the other hand, in case for HDFC, this becomes possible only on visiting the bank branch. ICICI Netbanking also offers online self-compounding accounts like Recurring Deposits and Money Multiplier Account that HDFC Netbanking doesn’t.
Insta-Alerts Customisation:Though both ICICI and HDFC Netbanking offers the facility of receiving message “Alerts” on your mobile to notify transactions, ICICI offers online customisation of the alerts upto the minutest details. For e.g, you can configure the threshold amounts above which you need an alert for, and also specify whether you need the alert by an SMS or email. You can as well toggle on/off the Insta-alerts for one or more services, say if you don’t want to receive the alerts for fund credits and need them only for debits. Cool, eh? Bravo ICICI
The User Interface and Ease-to-use: The million dollar question! Who offers a better and more user friendly interface? Well, HDFC Netbanking has a slightly simpler and user-friendly interface as compared to ICICI. However, what use is it if HDFC doesn’t offer as many services as ICICI Netbanking does?
(HDFC Netbanking main screen preview. Click on image for full-size screenshot)
The ICICI Netbanking interface on the other hand, though quite appealing aesthetically, ends up overwhelming the user with its plethora of options. It requires some practice by a naÃ¯ve user to master the usage of all the options available on ICICI Netbanking, whereas HDFC Netbanking, with its lesser options, is intuitive to use from Day 1.
(ICICI Netbanking main screen preview. Click on image for full-size screenshot)
Having said this, I would still prefer to use ICICI Netbanking anytime as it allows me to do any banking action that I can think of. And am sure that if HDFC starts offering everything that ICICI does, the HDFC Netbanking designers and developers will be seen asking for a big salary raise!
Bill-Pay Charges: The Bill Pay facility is offered free of cost by ICICI Netbanking, whereas HDFC charges INR 25 per quarter for Bill Pay. (Yes, I know it’s a meager amount, but still why should you pay when another is providing the service for free?)
Security process: The ICICI debit cards now comes with a “Grid” feature for increased online transaction security. The Debit cards have a table of 16 numbers at the back, and the online user is asked to enter 3 random numbers from this grid before the funds transfer can complete.
- Pros: This additional process results in increased security.
- Cons: You must possess your debit card at all times for transferring funds (or remember the sequence of the 16 two-digit numbers by heart – not everyone’s cup of tea!). So if you need to make an urgent transaction to a friend’s account and are not carrying the card in your wallet, be prepared to explain the delay to him!
Site Upgrade: Though HDFC Netbanking appears stagnant to me with minimal new offerings, ICICI Netbanking is constantly upgrading and is offering more and more to their customers every few months. It currently offers new services like smsNCash, [email protected] and Receive Funds, and seems to work hard to retain and grow its customer base.
Rating: So, do I sound like someone who has been paid handsomely to promote ICICI Netbanking? Believe me, that’s not the case and candid facts and user-experience are speaking for themselves. Taking these into consideration these, the woikr rating for these Netbankings is as follows:
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