Evolution of HDFC Ltd. – The Legacy of the Parekhs

Hello, all the young financial sleuths out there.

Let us learn a bit of the Industry Leaders. Not the Institutions but the people who have made it happen. 

The first thing that comes to your mind is Why do they Matter? 

Throughout the history of finance, the most successful banks across the world have often been associated with a single leader. These individuals have usually combined a clear strategic vision – or should that be mission, such is their zeal for success – with a real understanding of the minutiae of their business. Their names have been a byword for the businesses they have run.

Today, the global banking and finance sector is agog with exciting events, both for right and wrong reasons. Supply of senior leadership in good quality and quantity is always short, more so in difficult times. 

As they say, “if you know where you want to go, and want to get there fast, there is nothing like a strong leader to help you do it.”

Let’s start with the legacy of the Parkeh’s: Housing Development Finance Corporation Ltd. (HDFC Bank Ltd.)

In many ways, the story of HDFC is all about the grit of the Parekhs. The company began operations in 1977 as a mortgage lender as the brainchild of HT Parekh. HT, or Hasmukhbhai, as he was commonly known, had graduated with a bachelor’s degree in banking and finance from London School of Economics. In 1936, he returned to India and began his career with the stockbroking firm Harkisandass Lukhmidass while also teaching at the St Xavier’s College in Mumbai for about three years.

In 1977, Parekh, tired of seeing millions of Indians turning to buy a house only towards their retirement, after saving up for years, began working on an institution that would lend towards home loan financing. “Why can’t Indians have a home of their own with housing finance in the earlier years of their lives? Why should they have to wait till the end of their working careers?” Parekh is reported to have asked.

That led to the setting up of HDFC without any support from the government. 

In 1978, Parekh’s nephew, Deepak who was working at Chase Manhattan, joined his uncle on a 50 percent salary cut as a deputy general manager. 

Building India’s best bank

In 1993, as India opened up its banking sector to the private sector, Parekh and his team were ready to jump into the fray.  

The rules then stipulated a capital requirement of Rs 100 crore, and it also took him some serious efforts at convincing the board, before they agreed to move away from a single product company into newer frontiers, with the idea that the new business is run by an independent and professional management. The bank was incorporated in August 1994 as HDFC Bank Limited, and a year later, opened its first branch in south Mumbai’s Churchgate neighbourhood.

In its early days, HDFC Bank had largely focussed on corporate lending, before making a shift towards retail customers, and is widely regarded for growing its net profit by almost 30 percent every quarter for a decade, at a time when India’s economy was growing at a breakneck period in the 2000s. In 2000, HDFC Bank merged with Times Bank, and by 2008, the company acquired Mumbai-based Centurion Bank. 

Since its inception, HDFC Bank has been led by managing director Aditya Puri, a former CEO of Citibank Malaysia. In 2020, Puri, who had served as the longest-serving CEO of an Indian bank at HDFC Bank, finally retired, handing over the reins to Sashidhar Jagdishan. 

In 2017, India’s central banker, the Reserve Bank of India (RBI) added HDFC Bank to an elite list of Indian lenders, who were deemed “too big to fail”. Today, it is one of the three banks that fall in the category apart from State Bank of India, and ICICI Bank, which means that their failure could be catastrophic for the country’s financial system and economy.

Next we will continue the HDFC Story under the leadership of Mr. Aditya Puri. 

References: https://www.forbesindia.com/article/take-one-big-story-of-the-day/how-the-parekhs-helped-build-hdfc-bank-into-indias-secondlargest-company/75053/1#:~:text=HT%20Parekh%20founded%20Housing%20Development,at%20the%20age%20of%2065.