HDFC Bank Stock

HDFC Bank Limited (HDFC Bank) operates as a new generation private sector bank in India. The company provides financial services to customers in India across metro, urban, semi-urban and rural markets.

Segments

The company operates through three segments: Retail Banking, Wholesale Banking, and Treasury Operations.

Retail Banking products include deposit products, loans (including loans to small and medium enterprises), credit cards, debit cards, third-party mutual funds and insurance products, bill payment services, and other products and services.

Under Wholesale Banking, the company offers a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, and cash management. The company is also a leading provider of structured solutions in India, which combine cash management services with vendor and distributor finance to facilitate supply chain management for its corporate customers.

Treasury operations manage the company’s balance sheet, and include customer-driven services, such as advisory services related to foreign exchange and derivative transactions for corporate and institutional customers, supplemented by proprietary trading, including Indian Government securities.

Further, the company’s non-banking finance company (NBFC) subsidiary HDB Financial Services Limited (HDBFSL), offers a wide range of loans and asset finance products, including mortgage loans, commercial vehicle loans, consumer loans, and gold loans, as well as a range of business process outsourcing solutions. The company provides its customers with brokerage accounts through its subsidiary, HDFC Securities Limited (HSL), which is one of the leading stock brokerage companies in India and which offers a suite of products and services across various asset classes, such as equity, gold and debt, and via multiple platforms, i.e., online, mobile, telephone and branches.

The company distributes products of HDFC Limited and its group companies, such as home loans of HDFC Limited, life and general insurance products of HDFC Life Insurance Company Limited and HDFC ERGO General Insurance Company Limited, respectively, and mutual funds of HDFC Asset Management Company Limited.

The company has two subsidiaries: HDB Financial Services Limited (HDBFSL) and HDFC Securities Ltd. (HSL). HDBFSL is a non-deposit-taking NBFC engaged primarily in the business of retail asset financing while HSL is primarily in the business of providing brokerage and other investment services. As of March 31, 2022, HDBFSL had 1,374 branches across 989 cities in India.

Business Strategy

The company’s strategy is to provide a comprehensive range of financial products and services to its customers through multiple distribution channels.

The key elements of the company’s business strategy are to increase its market share of India’s expanding banking and financial services industry; continue its investments in technology to support its digital strategy; cross-sell its broad financial product portfolio across its customer base; maintain strong asset quality through disciplined credit risk management; and embed ESG (environmental, social and governance) principles within its wider business strategy.

For the year ended March 31, 2022. the company launched its Project Future Ready to catalyze, create and capture the next wave of growth. Project Future Ready classifies its growth engines under business verticals, delivery channels and technology/digital, which will be backed by the company’s traditional strengths in internal audit, underwriting, risk management and governance.

Principal Business Activities

The company’s principal business activities consist of retail banking, wholesale banking and treasury operations.

Retail Banking

The company considers itself a one-stop shop for the financial needs of its customers. The company provides a comprehensive range of financial products, including deposit products, loans, credit cards, debit cards, payment wallets, third-party mutual funds and insurance products, bill payment services and other services. The company’s retail banking loan products include loans to small and medium enterprises for commercial vehicles, construction equipment and other business purposes. The company groups these loans as part of its retail banking business considering, among other things, the customer profile, the nature of the product, the differing risks and returns, the market segment, its organization structure and its internal business reporting mechanism. Such grouping ensures optimal utilization and deployment of specialized resources in the company’s retail banking business.

The company also has specific products designed for lower-income individuals through its Sustainable Livelihood Initiative. Through this initiative, the company reaches out to the un-banked and under-banked segments of the Indian population in rural areas. The company actively markets its services through its banking outlets and alternate sales channels, as well as through its relationships with automobile dealers and corporate clients. The company follows a multi-channel strategy to reach out to its customers bringing to them choice, convenience. Innovation has been the springboard of growth in this segment and so has a strong focus on analytics and customer relationship management, which has helped the company to understand its customers better and offers tailor-made solutions.

As of March 31, 2022, the company had 6,342 branches and 18,130 ATMs/CDMs in 3,188 cities and towns. In addition, the company had 15,341 business correspondents, which were primarily manned by Customer Service Committees (CSCs). The company also provides telephone, internet and mobile banking to its customers. The company plans to continue to expand its banking outlet and ATM network, as well as its other distribution channels, subject to regulatory guidelines/approvals.

Retail Loans and Other Asset Products

The company offers a wide range of retail loans, including loans for the purchase of automobiles, personal loans, retail business banking loans, loans for the purchase of commercial vehicles and construction equipment finance, two-wheeler loans, credit cards and loans against securities. The company’s retail loans, of which 27.4 percent were unsecured, constituted 64.6 percent of its gross loans as of March 31, 2022. Apart from the company’s banking outlets, it uses ATMs, telephone banking, internet banking and mobile banking to promote its loan products. The company performs its own credit analysis of the borrowers and the value of the collateral if the loan is secured.

The company also buys mortgage and other asset-backed securities and invest in retail loan portfolios through assignments. In addition to taking collateral, in most cases, the company obtains debit instructions/post-dated cheques covering repayments at the time a retail loan is made. It is a criminal offense in India to issue a bad cheque. The company’s unsecured personal loans, which are not supported by any collateral, are a greater credit risk for its than secured loan portfolio. The company may be unable to collect in part or at all on an unsecured personal loan in the event of non-payment by the borrower.

Auto Loans

The company offers loans at fixed interest rates for financing of new and used car purchases. In addition to its general promotional efforts, the company specifically markets its offerings at various customer touch points, such as authorized original equipment manufacturers, dealer showrooms and outlets, authorized direct sales agents and its banking outlets, as well as actively cross-selling these products through other lending businesses of the company.

The company also markets its products through outbound and inbound calls with customers, as well as through the bank’s digital touch points. The company launched Xpress Car Loans, an industry-first end-to-end digital new car loan program for both existing customers and new customers, where the loan amount can be credited to dealers’ accounts within 30 minutes. Having established the company’s presence in this business over the last two decades it has consistently been a market leader and is well-equipped to serve the entire automobile ecosystem, including original equipment manufacturers, dealers and end-customers.

Personal Loans and Credit Cards

The company offers unsecured loans at fixed rates to salaried individuals, self-employed professionals, small businesses and individual businessmen.

The company offers credit cards on VISA, MasterCard, Diners and RuPay platforms under the classification of corporate cards, business cards, co-brand cards, premium retail cards and super premium retail cards. The company had approximately 16.5 million cards outstanding (i.e., total credit cards in circulation) as of March 31, 2022.

The company offers Easy EMI (equated monthly installments) through credit cards, debit cards and consumer loans. Easy EMI is available at no extra cost across multiple product categories, including offline and online channels under multiple brands.

The company’s efforts in the payments business are continuously focused on meeting customers’ specific requirements in the most accessible and relevant manner, while simplifying transactions.

The company has adopted preventive measures to strengthen its technology infrastructure and mitigate the risks of outages. Some of the key initiatives undertaken include the migration of core data centres in Bengaluru and Mumbai to state-of-the-art facilities, which has reinforced its capability to switchover in less than 45 minutes when needed. The capacity for unified payment interface UPI has been tripled, Net Banking and Mobile Banking capacity has been doubled to manage 90,000 users concurrently (a significant step as most of its customers rely on its digital channels for banking needs), disaster recovery drills have been completed for all critical payment systems and upgrades in network and security have been carried out. In addition, the company has intensified its DR drills for critical applications and intends to further strengthen its disaster recovery(DR) processes and capabilities through a focus on reducing recovery time objective (RTO) for key applications to 40-60 minutes, which has been completed for critical applications as planned, deep automation to improve configuration drift management between Primary and DR sites, enrichment of existing automation tools for DR to cover all scenarios and further reduce RTO time, and refactoring key applications into an Active-Active always available design.

Retail Business Banking

The company addresses the borrowing needs of the community of small businessmen primarily located within the servicing range of its banking outlets by offering facilities, such as credit lines, term loans for expansion or addition of facilities and discounting of receivables. The company classifies these business banking loans as a retail product. Such lending is typically secured with current assets, as well as immovable property and fixed assets in some cases. The company also offers letters of credit, guarantees and other basic trade finance products, foreign exchange and cash management services to such businesses.

Commercial Vehicles and Construction Equipment Finance

The company has a strong market presence in the commercial vehicle and construction equipment financing businesses. The company offers a wide range of banking products across the country, which can be customized to the individual needs of its customers.

The company provides secured financing for a full range of commercial vehicles and construction equipment along with working capital, trade advances, bank guarantees, and transaction banking products and services, among others, both traditional and digital, to companies active in the infrastructure, logistics and transportation industries. In addition to funding domestic assets, the company extends financing for imported assets for which it opens foreign letters of credit and offer treasury services, including forex and forward exchange covers. The company has an excellent relationship with most leading original equipment manufacturers, together with whom it collaborates to promote and market financing options.

Housing Loans

The company provides home loans through an arrangement with its principal shareholder HDFC Limited. Under this arrangement, the company sources loans for HDFC Limited through its distribution channels. HDFC Limited approves and disburses the loans, which are kept on their books, and it receives a sourcing fee for these loans. The company has a right, but not an obligation, to purchase up to 70 percent of the fully disbursed home loans sourced under this arrangement through either the issue of mortgage-backed pass through certificates (PTCs) or a direct assignment of the loans. The balance is retained by HDFC Limited.

Other Retail Loans

Two-Wheeler Loans

The company offers loans for financing the purchase of mopeds, scooters and motorcycles. The company markets this product in ways similar to its marketing of automobile loans.

Loans Against Securities

The company offers loans against equity shares, mutual fund units, bonds and other securities that are on its approved list. The company limits its loans against equity shares to Rs. 2.0 million per retail customer in line with regulatory guidelines and limit the amount of its total exposure secured by particular securities. The company lends only against shares in book-entry (dematerialized) form, which ensures that it obtains perfected and first-priority security interests. The minimum margin for lending against shares is prescribed by the Reserve Bank of India (RBI). The collateral value of the security for these loans is dependent on the quoted price of the security.

Loan Assignments

The company purchases loan portfolios, generally in India, from other banks, financial institutions and financial companies, which are similar to asset-backed securities, except that such loans are not represented by PTCs. Some of these loans also qualify toward the company’s directed lending obligations.

Kisan Gold Card

Under the Kisan Gold Card (KGC) scheme, funds are extended to farmers in accordance with the RBI’s Kisan Credit Card scheme which is aimed at financing agricultural and related credit requirements. The KGC is a credit facility of a specified amount, which is offered to farmers to finance certain requirements, including the production of crops, post-harvest repair and maintenance expenses, miscellaneous consumption needs, and allied agricultural activities, such as animal husbandry, poultry farming and maintaining fisheries. In addition to loans for recurring needs, long term investment loans are granted for purposes, including the purchase of farm machinery, establishing logistical facilities and land development activities, such as the digging of tube wells, installation of irrigation sprinklers, construction of post-harvest management infrastructure and community farming assets like storage facilities, packaging, assaying and sorting grading units, primary processing centres, and sheds for animals.

Depending on the requirements, various types of facilities are extended under KGC. These include cash credit, overdrafts, term loans, farm development loans and drop line overdraft limits. The amount of cash credit funding is based on the farmer’s cropping pattern, the amount of land used and scale of finance, while for term loans it is based on the unit cost of assets. These facilities are extended under a range of crop and geography-specific products, which are designed on the basis of the harvest cycles and the local needs of farmers spread across diverse agro-climatic zones.

Through its knowledge of rural customers’ preferences, the company has established a strong footprint in rural areas and it is able to impact the lives of thousands of rural people making banking accessible to areas which lack formal sources of financial services, including credit. The company’s focus in rural markets is not only to increase credit uptake, but also to strengthen relationships with rural customers by empowering them. In addition to advising farmers on their financial needs, the company is increasingly focusing on educating them on the benefits of various governmental and regulatory schemes, such as crop insurance, interest subvention and agriculture infrastructure.

The company also aims to cater to other financial needs of rural customers through appropriate banking products.

Loans Against Gold Jewelry

The company offers loans against gold jewelry to all customer segments, including women, small and marginal farmers and micro, small and medium enterprise (MSME) customers. Such loans are typically offered with different repayment modes, with repayment either at monthly intervals or at maturity. Collateral value is dependent on the market price of the gold and therefore these loans also have margin requirements in the event of a decrease in the value of the gold. Customers may avail themselves of an additional loan in case of an increase in the value of the gold. Loans against gold jewelry are also extended to existing customers of the bank in order to cater to their additional funding needs.

The company also offers loans which primarily include loans/overdrafts against time deposits, health care equipment financing loans, tractor loans and loans to self-help groups.

Retail Deposit Products

Retail deposits provide the company with a low-cost, stable funding base and have been a key focus area for it since commencing operations. Retail deposits represented approximately 81.1 percent of its total deposits as of March 31, 2022.

The company’s individual retail account holders have access to the benefits of a wide range of direct banking services, including debit and ATM cards, access to internet, phone banking and mobile banking services, access to its growing branch and ATM network, access to its other distribution channels and eligibility for utility bill payments and other services. The company’s retail deposit products include the following:

Savings accounts, which are demand deposits, primarily for individuals and trusts.

Current accounts, which are non-interest-bearing accounts designed primarily for business customers. Customers have a choice to select from a wide range of product offerings which are differentiated by basis minimum average quarterly account balance requirements and the nature of the transactions.

Time deposits, which pay a fixed return over a predetermined time period.

As of March 31, 2022, 29 percent of the company’s retail deposit customers contributed 81 percent of its retail deposits.

The company also offers special value-added accounts, which offer its customers added value and convenience. These include a time deposit account that allows for automatic transfers from a time deposit account to a savings account, as well as a time deposit account with an overdraft facility.

Other Retail Services and Products

Debit Cards

The company had approximately 43.0 million debit cards outstanding as of March 31, 2022. The cards can be used at ATMs, point-of-sale terminals and payment gateways in India and in other countries across the world.

Individual Depositary Accounts

The company provides depositary accounts to individual retail customers for holding debt and equity instruments. Securities traded on the Indian exchanges are generally not held through a broker’s account or in a street name. Instead, an individual has own account with a depositary participant. Depositary participants, including the company, provide services through the major depositaries established by the two major stock exchanges. Depositary participants record ownership details and effect transfers in book-entry form on behalf of the buyers and sellers of securities. The company provides a complete package of services, including account opening, registration of transfers and other transactions and information reporting.

Mutual Fund Sales

The company is a registered distributor with the Association of Mutual Funds in India (AMFI). The company engages in distributing mutual fund products to its customers through its staff, who are AMFI certified. The company offers units of most large and reputable mutual fund houses in India to its customers. The company distributes mutual fund products primarily through its banking outlets and its wealth relationship managers. The company receives trail income on the new business, as well as on the existing assets under management.

Insurance

HDFC Bank is registered as a corporate agent for the solicitation of life, general and health insurance business under regulations prescribed by the Insurance Regulatory and Development Authority of India. The company has arrangements with three life insurance companies, namely HDFC Life Insurance Company Limited, Tata AIA Life Insurance Company Limited and Aditya Birla Sun Life Insurance Company Limited, three general insurance companies, namely HDFC ERGO General Insurance Company Limited, Bajaj Allianz General Insurance Company Limited and ICICI Lombard General Insurance Company Limited and two health insurance companies, namely Aditya Birla Health Insurance Company Limited and Niva Bupa Health Insurance Company Limited. The company earns commissions on new premium collected, as well as trail income in subsequent years in certain cases while the policy is still in force.

Bill Payment Services

The company is a part of the Bharat Bill Payment System network and offers its customers bill payment services for all utility companies, including water, electricity, gas, telephone, direct-to-home, mobile recharge, Fastag, LPG cylinder, cable television, housing society and internet service providers, as well as financial products, such as insurance and mutual funds. The company also offers Smartpay (autopay functionality) for all these bills. This is a valuable convenience that the company offers its customers. The company offers these services to customers through multiple distribution channels, such as internet banking, mobile banking and phone banking.

Corporate Salary Accounts

The company offers Corporate salary accounts to employees of corporate and government entities, enabling employees’ salaries to be credited by the entity directly or via the company. A salary account is a type of savings account with no minimum balance requirement in lieu of regular salary credits. Benefits, including a premium debit card and complimentary personal accident cover are provided, amongst others. The company also offers salary accounts tailored for employees of the defense and government sector. As of March 31, 2022, these accounts constituted 27.9 percent of the company’s savings deposits by value.

Non-Resident Indian Services

Non-resident Indians (NRIs) are an important target market segment for the company given their relative affluence and strong ties with family members in India. The company’s private and premium banking programs in India are also extended to NRI clients. Relationship managers in India facilitate the banking and investment transactions of its NRI clients. Through the company’s overseas branch in Bahrain, it offers deposits, bonds, equity, mutual funds, treasury and structured products offered by third parties to the company’s NRI clients. The company also has referral arrangements with product/service providers for NRI clients.

Retail Foreign Exchange

The company purchases foreign currency from and sells foreign currency to retail customers in the form of cash, traveler’s cheques, demand drafts, foreign exchange cards and other remittances. The company also carries out foreign currency cheque collections.

Customers and Marketing

The company identifies and targets distinct market customer segments for its retail services. Customers are at the core of all marketing initiatives of the company, and it relies on digital and analytics to improve their experience. Digital marketing relies on advanced analytics to identify and target the right customer with the right product at the right time and to provide customers with an omni-channel experience with high levels of personalization. The company’s investments in advanced analytics tools in the cloud have contributed to its understanding of customer behavior and preferences and thus help curate personalized interventions at scale and create relevant customer engagement. The company has invested in marketing technology solutions to create frictionless digital journeys that allow customers to consume its financial products and services with minimum physical interface. The company executes digital marketing plans at scale and in tandem with traditional marketing channels to provide its customers quick and easy access to all its financial solutions, including loans, deposits and payment solutions.

The Infinite Smiles program helps the company establish customer-centric actions through improvements in products, services, processes and policies, and enables it to measure customer loyalty through a closed-loop customer feedback system. The insights the company receives help it implement changes to further improve customer experiences and strengthen their loyalty.

The company also has programs that target other specific segments of the retail market. For example, under the company’s private and premium banking programs, the relationship managers distribute mutual funds and insurance products and provides incidental advice related to these products. Customers interested in alternate products (such as fixed income, private equity, alternate investment funds and structures) or services, such as succession planning, tax planning, trust formation and will-writing are referred to HSL who have referral arrangements with the concerned product/service providers. Customers seeking investment advice on alternate products are also referred to HSL (a registered investment adviser regulated by SEBI (Investment Advisers) Regulations 2013), where a team of certified investment advisers provide this service. In addition, the company participates in the distribution of government bonds and have referral tie-ups with other corporates for customers desirous of availing their products and services that synergize with its businesses.

The company continues to be strongly committed to financial inclusion programs that extend banking services to underserved populations. The company’s Sustainable Livelihood Initiative caters to lower-income individuals to finance their economic activity, and also provides skills training, livelihood financing, credit counseling and markets linkages in terms of access to, or contacts in, their local markets.

Wholesale Banking

The company provides its corporate and institutional clients with a wide range of commercial banking products and transactional services.

The company’s principal commercial banking products include a range of financing products, documentary credits (primarily letters of credit) and bank guarantees, foreign exchange and derivative products, investment banking services and corporate deposit products. The company’s financing products include loans, overdrafts, bill discounting and credit substitutes, such as commercial paper, debentures, preference shares and other funded products. The company’s foreign exchange and derivatives products assist corporations in managing their currency and interest rate exposures.

In terms of commercial banking products, the company’s customers include companies that are part of private sector business houses, public sector enterprises and multinational corporations, as well as small and mid-sized businesses. The company’s customers also include suppliers and distributors of corporations to whom it provides credit facilities and with whom it thereby establishes relationships as part of a supply chain initiative for both its commercial banking products and transactional services. The company aims to provide its corporate customers with high-quality customized service. The company has relationship managers who focus on particular clients and who work with teams that specialize in providing specific products and services, such as cash management and treasury advisory services.

Loans to small and medium enterprises, which are generally loans for commercial vehicles, construction equipment and business purposes, are included as part of the company’s retail banking business. The company groups these loans as part of its retail banking business considering, among other things, the customer profile, the nature of the product, the differing risks and returns, its organization structure and its internal business reporting mechanism. Such grouping ensures optimal utilization and deployment of specialized resources in its retail banking business.

The company’s principal transactional services include cash management services, capital markets transactional services and correspondent banking services. The company provides physical and electronic payment and collection mechanisms to a range of corporations, financial institutions and Government entities. The company’s capital markets transactional services include custodial services for mutual funds and clearing bank services for the major Indian stock exchanges and commodity exchanges. In addition, the company provides correspondent banking services, including cash management services and funds transfers, to foreign banks and co-operative banks.

Commercial Banking Products

Commercial Loan Products and Credit Substitutes

The company’s principal financing products are working capital facilities and term loans. Working capital facilities primarily consist of cash credit facilities and bill discounting. Cash credit facilities are revolving credits provided to its customers that are secured by working capital, such as inventory and accounts receivable. Bill discounting consists of short term loans, which are secured by bills of exchange that have been accepted by its customers or drawn on another bank. In many cases, the company provides a package of working capital financing that may consist of loans and a cash credit facility, as well as documentary credits or bank guarantees. Term loans consist of short term loans and medium term loans which are typically loans of up to five years in duration. Over 90.0 percent of the company’s loans are denominated in rupees with the balance being denominated in various foreign currencies, principally the U.S. dollar.

The company also purchases credit substitutes, which typically comprise commercial paper and debentures issued by the same customers with whom it has a lending relationship in its wholesale banking business. Investment decisions for credit substitute securities are subject to the same credit approval processes as loans, and the company bears the same customer risk as it does for loans extended to these customers. Additionally, the yield and maturity terms are generally directly negotiated by the company with the issuer.

Whilst the company generally lends on a cash flow basis, it also requires collateral from a large number of its borrowers. As of March 31, 2022, approximately 60.6 percent of the aggregate principal amount of the company’s gross wholesale loans was secured by collateral and Rs. 2,007.5 billion in aggregate principal amount of loans were unsecured.

Bill Collection, Documentary Credits and Bank Guarantees

The company provides bill collection, documentary credit facilities and bank guarantees for its corporate customers. Documentary credits and bank guarantees are typically provided on an ongoing basis.

Bill collection: The company provides bill collection services for its corporate clients in which it collects bills on behalf of a corporate client from the bank of its client’s customer (i.e., import bill collection). Under the import bill collection system, the company receives instructions from overseas banks, deal with necessary documents and effect remittances on behalf of its clients. The company also provides export collection, where it receives documents from its corporate clients and send such documents to the overseas bank for collection. Once the export collection is realized, the company credits its corporate clients’ accounts with the relevant amount.

Documentary Credits: The company issues documentary credit facilities on behalf of its customers for trade financing, sourcing of raw materials and capital equipment purchases.

Bank Guarantees: The company provides bank guarantees on behalf of its customers to guarantee their payment or performance obligations. A part of its guarantee portfolio consists of margin guarantees to brokers issued in favor of stock exchanges.

Foreign Exchange and Derivatives

The company’s foreign exchange and derivative product offering to its customers covers a range of products, including foreign exchange and interest rate transactions and hedging solutions, such as spot and forward foreign exchange contracts, forward rate agreements, currency swaps, currency options and interest rate derivatives. These transactions enable the company’s customers to transfer, modify or reduce their foreign exchange and interest rate risks. A specified group of relationship managers from its treasury front office works on such product offerings in line with the customers’ risk and other requirements and within the framework of the company’s Suitability and Appropriateness policy.

Forward exchange contracts are commitments to buy or sell fixed amounts of currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest in one currency against another and exchange of principal amounts at maturity based on predetermined rates. Rupee interest rate swaps are commitments to exchange fixed and floating rate cash flows in rupees without exchanging the notional principal. A forward rate agreement gives the buyer the ability to determine the underlying rate of interest for a specified period commencing on a specified future date (the settlement date) when the settlement amount is determined, being the difference between the contracted rate and the market rate on the settlement date. The underlying rate of interest could be an interest rate curve, interest rate index or bond yield. Currency options give the buyer the right, but not an obligation, to buy or sell specified amounts of currency at agreed rates of exchange on or before a specified future date.

The company enters into forward exchange contracts, currency options, forward rate agreements, currency swaps and rupee interest rate swaps in the inter-bank market, broadly to support its customers’ requirements and, to a limited extent, for its own account.

Investment Banking

The company’s Investment Banking Group offers services in the debt and equity capital markets. The group has arranged project financing for clients across various sectors, including telecoms, roads, healthcare, energy, real estate, data centres and cement. The group advised on aggregate issuances of over Rs. 550.8 billion worth of rupee-denominated corporate bonds across public sector undertakings, financial institutions and the company’s corporate clients, becoming the third-largest corporate bond arranger in the market for fiscal year 2022. In the equity capital markets business, the company concluded various transactions, including seven initial public offerings, one rights issue and one share buyback. In the advisory business, it advises clients in the infrastructure, new economy and digital, financial services, industrials and healthcare sectors.

Wholesale Deposit Products

As of March 31, 2022, the company had wholesale deposits aggregating to Rs. 2,944.1 billion, which represented 18.9 percent of its total deposits. The company offers both non-interest-bearing current accounts and time deposits. The company is permitted to vary the interest rates on its wholesale deposits based on the size of the deposit (for deposits greater than Rs. 20.0 million), provided the rates booked on a day are the same for all customers of that deposit size for that maturity.

Transactional Services

Cash Management Services (CMS)

The company is a technology-driven bank and have been providing digital CMS solutions to its customers from diverse industry segments.

The company offers traditional and new age digital banking products and experience an increasing demand for digital banking services. The company has been one of the leading banks in the traditional CMS market. The company has aligned its product offering with changing and dynamic customer needs. Approximately 95 percent of the company’s transactions are done on the electronic platform.

The company is a leading service provider of digital banking products with a large share of business across customer segments.

Clearing Bank Services for Stock and Commodity Exchanges

The company acts as a clearing bank for the cash and derivatives (F&O) segment, currency derivatives, commodity derivatives and other segments for the National Stock Exchange of India Limited, the BSE Limited, Multi Commodity Exchange, National Commodity and Derivatives Exchange Limited, as well as the two exchanges set up in Gujarat International Finance Tec-City (GIFT City), NSE International Limited and India International Exchange. As a clearing bank, the company provides the exchanges/clearing corporations with a means for collecting and making payments as part of settlement obligations to investors through registered brokers and custodians. The company also earns interest, transaction fees and commissions by offering various fund-based and non-fund-based facilities and transactional services to the stock brokers and clearing members.

Custodial Services

The company provides custodial services to domestic and foreign investors that include domestic mutual funds, portfolio managers, insurance companies, alternative investment funds and foreign portfolio investors (FPIs). These services include safekeeping of securities, trade settlement, collection of dividends and interest payments on securities, fund accounting services and derivatives clearing services (including currency derivatives and interest rate futures). The company is registered as a designated depository participant with the local securities regulator, i.e., the Securities and Exchange Board of India, and are permitted to grant registration to FPIs.

Correspondent Banking Services

The company acts as a correspondent bank for co-operative banks, foreign banks and certain private banks. The company provides cash management services, funds transfer services, such as letters of credit, foreign exchange transactions and foreign cheque collection. The company earns revenue on a fee-for-service basis and benefit from the cash float, which reduces its overall cost of funds.

The company is well-positioned to offer this service to co-operative banks, foreign banks and select private banks in light of the structure of the Indian banking industry and its position within it. Co-operative banks are generally restricted to a particular state and foreign banks/some private banks have limited branch networks. The customers of these banks frequently need services in other areas of the country where their own banks do not operate. Because of the company’s technology platforms, its geographical reach and the electronic connectivity of its branch network, it can provide these banks with the ability to provide such services to their customers.

Tax Collections

The company has been appointed by the Government of India to collect direct taxes. In 2022, the company collected Rs. 4,089 billion of direct taxes for the Government of India. The company is also appointed to collect Goods and Services Tax (GST) and other indirect taxes in India. In 2022, the company collected Rs. 2,247 billion of such indirect taxes for the Government of India and relevant state Governments. The company earns a fee from the Government of India for each tax collection and benefit from the cash float. The company hopes to expand its range of transactional services by providing more services to Government entities.

Treasury

The company’s treasury group manages its balance sheet, including its maintenance of reserve requirements and the management of market and liquidity risk. The company’s treasury group also provides advice and execution services to its corporate and institutional customers with respect to their foreign exchange and derivatives transactions. In addition, the company’s treasury group seeks to optimize profits from its proprietary trading, which is principally concentrated on Indian Government securities.

The company’s client-based activities consist primarily of advising corporate and institutional customers and transacting spot and forward foreign exchange contracts and derivatives. The company’s primary customers are multinational corporations, large and medium sized domestic corporations, financial institutions, banks and public sector undertakings. The company also advises and enters into foreign exchange contracts with some small companies and NRIs.

Foreign Exchange and Derivatives

The company’s treasury operations primarily include liquidity management and managing the interest rate risks in its investment portfolio along with limited proprietary trading.

The company’s treasury operations also include foreign exchange and derivative product offerings to its customers covering a range of products, including foreign exchange and interest rate transactions and hedging solutions, such as spot and forward exchange contracts, forward rate agreements and derivatives.

The company also enters into derivative contracts not denominated in rupees. Typically, the market risks arising out of such products are economically hedged in the interbank market. The company also operates under a capped risk exposure to each interbank counterparty.

Domestic Money Market and Debt Securities Desk

The company’s principal activity in the domestic money market and debt securities market is to ensure that it complies with its reserve requirements, including Liquidity Coverage Ratio (LCR). These consist of a cash reserve ratio, which the company meets by maintaining balances with the RBI, and a statutory liquidity ratio, which it meets by purchasing Indian Government securities. The company also participates in the inter-bank call deposit market and engages in limited trading of other debt instruments.

Equities Market

The company trades a limited amount of equities of Indian companies for its own account as part of the equity trading portfolio of its treasury operations, which are specified in the approved list of equity universe that is reviewed at least on a quarterly basis or on a need-based basis as mandated in its internal policy. As of March 31, 2022, the company had an internal aggregate approved limit of Rs. 1,300 million for proprietary equity trading, which included Rs. 650 million (defined as a sub-limit of the aggregate approved limit) for primary purchases of equity investments for proprietary trading and Rs. 260 million (defined as a sub-limit of the aggregate approved limit) for investment in equity mutual funds for proprietary trading with requisite approvals. The company sets limits on the amount invested in any individual company, as well as a stop-loss trigger level and a value-at-risk limit for the proprietary equity trading portfolio.

In addition, the company had long term and strategic investments in equities and equity-linked instruments within the board-approved quantum for such investments. All such investments are carried out after review and approval of the proposal by the investment committee and the board, if applicable.

Distribution Channels

The company delivers its products and services through a variety of distribution channels, including banking outlets, direct sales agents, ATMs, and telephone, mobile and internet banking.

Banking Outlets

The company’s banking outlets are comprised of branches and business correspondents. As of March 31, 2022, the company had a total of 6,342 branches covering 3,188 cities and towns. In addition, the company had 15,341 business correspondents, which were primarily manned by CSCs. All of the company’s banking outlets are electronically linked so that its customers can access their accounts from any banking outlet regardless of where they have their accounts.

Almost all of the company’s banking outlets focus exclusively on providing retail services and products, though a few also provides wholesale banking services. The range of products and services available at each banking outlet depends in part on the size and location of the banking outlet. The company’s offer various banking services to its customers through its arrangements with correspondent banks and exchange houses in overseas locations.

As part of its banking outlet licensing conditions, the RBI requires that at least 25.00 percent of all incremental banking outlets added during the year be located in unbanked rural centres/left wing extremism (LWE) affected districts/north eastern states and Sikkim, where during fiscal year 2022, 270 of its banking outlets (including banking outlets manned by the CSCs) were added.

The company has overseas banking outlets in Bahrain, Hong Kong and the Dubai International Finance Centre (DIFC). These banking outlets cater to the needs of the company’s overseas clients, both corporate and individual. They offer banking, trade finance and wealth management (primarily for non-resident individual customers). In addition, the company has representative offices in Abu Dhabi, Dubai and Nairobi. The company also has a presence in the International Financial Service Centre Banking Unit at the Gujarat International Finance Tec-City (GIFT City) in Gandhinagar, Gujarat. This unit operates in a similar fashion to the company’s foreign banking outlets and customers are able to purchase products, such as trade credits and foreign currency term loans, including external commercial borrowings and derivatives to hedge loans. The company’s unit in GIFT City is regulated and supervised by the RBI.

Automated Teller Machines

As of March 31, 2022, the company had 18,130 ATMs/CDMs, of which 8,703 were located at its banking outlets or extension counters and 9,427 were located off-site.

All the company’s ATMs are equipped with a voice-guided system and a Braille keypad for the visually challenged. Customers can use the company’s ATMs for a variety of functions, including withdrawing cash, monitoring bank balances, mobile recharge/top-up, and cardless cash withdrawals. Customers can access their accounts from any of the HDFC Bank ATMs or non-HDFC Bank ATMs. ATM cards issued by American Express or other banks in the Rupay, Visa, MasterCard, Maestro, JCB, Unified Payments Interface (UPI), Cirrus, Citrus or Discover Financial Services networks can be used in the company’s ATMs and the company receives a fee for each transaction. The company’s debit cards issued with respective networks (Rupay/VISA/MasterCard) can be used at ATMs of other banks for which it pays the acquiring bank a fee. The company’s customers can use its Cash Deposit and Withdrawal Machines (CDMs) for a variety of functions, including cash deposits, cash withdrawals and monitoring bank balances.

Telephone Banking

The company provided telephone banking services to its customers in 3,188 cities and towns as of March 31, 2022. Customers can access their accounts over the phone through the company’s 24-hour automated voice response system and can conduct balance and transaction inquiries, order cheque books and order stop payments of cheques. In certain cities, the company also has staff available during select hours to assist customers who want to speak directly to one of its telephone bankers. In select cities, customers can also engage in financial transactions, such as opening deposits.

Mobile Banking

The company’s mobile banking application is specially designed to help its customers manage their banking needs more efficiently. With a secure access and an intuitive, multi-feature design, the application provides its customers with an improved banking experience. The company’s mobile banking application is designed for an era where its customers can get most of their banking needs serviced on their mobile phones, from sending money (via the national electronic funds transfer (NEFT), immediate payment service and unified payment interface (UPI) to managing accounts, bills and investments.

Internet Banking

The company’s internet banking platform is convenient, comprehensive and safe, enabling its customers to bank 24/7 from the comfort of their home or office. Users can perform the majority of banking transactions online and be assured of the highest levels of security standards. The platform provides several different services, including viewing balances and statements, fund transfers, payment of bills, opening term and recurring deposit accounts, mobile and direct-to-home recharges, ordering cheque books and online shopping.

Payment Wallets

PayZapp aims to make digital payments safe. PayZapp provides a comprehensive solution for all payment, banking and financial requirements for the company’s internal and external customers. It offers a platform for making different types of payments, including grocery, food delivery, shopping, mobile and direct-to-home recharges, rent payments, FASTag recharge and utility bills. Using PayZapp, customers can also apply for a credit card or a personal loan, send money to others and transfer money to a bank account.

Intellectual Property

The company utilizes a number of different forms of intellectual property in its business, including its HDFC Bank brand and the names of the various products it provides to its customers.

History

HDFC Bank Limited was founded in 1994. The company was incorporated in 1994.