HDFC’s digital journey chronicled; Scribe Tamal Bandopadyay writes about how largest non-public sector lender embraced digital adjustments


Journalist and author Tamal Bandopadyay’s newest guide titled HDFC Bank 2.0 – From Dawn to Digital, on the financial institution’s digital journey speaks about how the biggest non-public sector lender embraced digital adjustments. Here is an unique excerpt from the guide printed by Jaico.

Design Your Own Nike Shoes

Progress on the digital entrance was spectacular however HDFC Bank was hungry for extra. A Nike advert with the tagline ‘Make yourself’ gave Aditya Puri the concept for ‘loans against securities’. He believed the dematerialized or demat accounts of shoppers may very well be linked with financial savings accounts, enabling them to create their very own limits and credit score accounts immediately.

In 1999, HDFC Bank was not solely busy engaged on Y2K-related adjustments to its programs, but in addition launching new and progressive merchandise out there. (Y2K pertains to the tweaks that wanted to be made to make sure that programs might address the shift to the yr 2000.)

Loan in opposition to shares was one such product. Incidentally, HDFC Bank was most likely the primary to introduce Initial Public Offer (IPO) financing for people. While for mortgage in opposition to shares, a buyer pledges to the financial institution the shares one holds, for IPO financing the financial institution steps in to help the brand new share purposes with a moneyline. The course of was paper-based as Depository Participants (DPs) have been nonetheless getting used to demat shares. It began with choose prospects and the enterprise grew steadily.

By 2016, the loans in opposition to shares portfolio crossed Rs. 20 billion. The progress of expertise had been so dramatic throughout this era that the financial institution was inspired to design an answer built-in with a number of purposes throughout the organisation in addition to the National Securities Depository Ltd. (NSDL) and the Central Depository Services Ltd. (CDSL).

It labored with each the depositories to create a whole on-line digital resolution for patrons who sought loans in opposition to fairness by means of their demat accounts with the financial institution. It already had the experience to course of such loans. The change was required to leverage this experience within the digital world and have interaction NSDL and CDSL because the enterprise is very regulated. It began conceptualizing the product in 2016.

Book cowl. Pic courtesy: Jaico Publications

Over a number of weeks, a number of iterations and quite a few late-evening discussions over samosas, the staff arrived on the most optimum resolution by means of integration of a number of purposes throughout the financial institution with the programs of NSDL and CDSL.

As most digital options make use of Straight Through Processing (STP) to hurry up transaction time, it was crucial that every leg of the operation was accomplished in lower than one second and the general course of was accomplished inside a couple of minutes. For the client, it’s an end-to-end self-service resolution that’s paperless with no handbook intervention—a primary for the financial institution in addition to the depository members, globally.

Loan in opposition to shares

In May 2017, the financial institution began advertising and marketing this product as one which allowed prospects to create their very own Loans Against Shares (LAS) on-line. It takes about three minutes from beginning the applying to getting the overdraft restrict set within the account. Apart from opening an LAS account and setting overdraft limits, a buyer having an account with HDFC Bank may launch shares already pledged for the ability and exchange shares by pledging new or further authorised securities.

After that, on the product desk was Loans Against Mutual Funds (LAMF). There are regulatory limits on loans in opposition to shares as these are thought of capital market publicity of a financial institution. However, mutual fund holdings in debt devices usually are not thought of capital market publicity and therefore there isn’t any restrict on the quantity that may be given as loans to prospects.

When HDFC Bank began exploring the chance, it zeroed in on Computer Age Management Series Pvt. Ltd. (CAMS), the Registrar and Transfer Agent (RTA) for a number of Asset Management Companies (AMCs). This time, loans have been to be given even in opposition to mutual fund items held in non-demat type.

By October 2017, it acquired a grip on the transaction flows however hit a highway block. As it had began its journey on a digital platform and frozen its internet banking resolution, the product needed to look forward to the digital platform to be prepared. Instead of ready, it began exploring a special strategy. The staff requested for 90 days to develop, take a look at and implement the product. The resolution was prepared by finish of January 2018. By November 2018, 75% of all loans in opposition to shares and mutual funds have been digital.

Change of Guard

Amid all this, there was a change of guard. Anil Jaggia determined to depart the financial institution in 2015. He joined Avendus Capital Pvt. Ltd. however just for a couple of months. Bhavesh Zaveri took over as head of each Operations and Technology. Their working types differed however each had the identical tech imaginative and prescient.

By this time, Aditya’s digital push was at its peak. The initiative included consolidation of expertise platforms and digital buyer channels; launching new digital channels and merchandise; bringing automation to newer areas of banking—all revolving round the important thing theme of ‘customer-centricity’.

The fee at which expertise was altering, it wasn’t a query of maintaining forward however one in all catching up. Balancing new expertise adoption with the safety-first philosophy of the financial institution was a difficult enterprise.

“We never would have imagined two decades back that banking and social interactions are going to have commonalities and we will be finding these similarities through technology,” Bhavesh mentioned. “We are not a technology innovator; that is not our play. Rather we try to use innovative technologies from our partners. We seek to partner with the right technology vendors.”

The partnership with Murex S.A.S, a French expertise firm with world reputation in offering buying and selling, threat administration and processing options within the capital market, overseas trade, derivatives, and debt securities house, is an fascinating one. One December morning in 2015, Murex Asia Pacific CEO Guy Otayek, alongside along with his Sales staff, met Bhavesh and his colleagues within the fifth-floor convention room at Bank House to kick off the dialogue.

The implementation began after senior administration groups of either side flagged off the venture in Mumbai in October 2016, marking the start of the financial institution’s digital consolidation initiative for the treasury enterprise.

Changing the Way the Treasury Works

For the financial institution, this venture was the largest treasury initiative up to now decade. It was additionally a type of tasks near the guts for Bhavesh and Ashish Parthasarathy, who has been heading the financial institution’s Treasury since 2009 after Sudhir Joshi retired. Paresh Sukthankar, the financial institution’s former Deputy Managing Director and arguably one of the best threat supervisor within the Indian monetary system, was additionally engaged in maintaining the imaginative and prescient clear and route regular.

A core 40-member venture staff was constituted with members from all stakeholders. They have been despatched to Singapore to grasp the options of the software program. Sending such a big staff abroad on a data expedition was one thing unprecedented in HDFC Bank. Bhavesh managed to persuade Paresh to approve the journey as an exception.

The first part of the venture was accomplished on a date pre-decided 20 months earlier than. When the merchandise went dwell on 12 February 2018, the Murex staff uncorked a champagne bottle for the financial institution staff on the treasury dealing room at Bank House. Another celebration adopted on the financial institution’s Kanjurmarg workplace that homes its Operations and Business Technology Group.

The Murex software—a single built-in platform—has many advantages. It replaces a number of purposes in treasury with a single sturdy software, decreasing a few of the dangers related to a number of system. It additionally allows pricing and valuation of derivatives transactions.

The philosophy of HDFC Bank is to seek out expertise companions for long-term relationships. Naturally, the financial institution thinks a fantastic deal earlier than partnering any expertise firm. “We spend time and make efforts in picking our technology partners. And once this is done, we stick to the relationship,” Bhavesh mentioned.

Though the core banking accomplice might need modified palms and names—from CITIL to i-Flex Solutions India Ltd. to turning into a part of Oracle Corp. as Oracle Financial Services Software (OFSS) Ltd.—the partnership with the financial institution remains to be going sturdy even after 20 years.

Excerpt from HDFC Bank 2.0: From Dawn to Digital by Tamal Bandyopadhyay, shared right here with the permission of Jaico Publishing House. Available for pre-order on-line and throughout bookstores on 10 July.

HDFC Bank 2.0 – From Dawn to Digital
By Tamal Bandopadyay
Foreword by Nandan Nilekani
Jaico Publishing House
Pages 452
Price: Rs 499

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