Address:
HDFC Bank Colombo Head office P.O Box 2085 Sir Chittampalam A. Gardinear Mawatha, Colombo 02,Sri Lanka.
Telephone:
+94 11 2356800 , +94 11 2447354
Email:
hdfc@hdfc.lk
Web:
http://www.hdfc.lk/
Q: What is the HDFC Bank of Sri Lanka’s USP in the context of being a participant in the banking sector?
A: HDFC Bank is a unique organisation established by an act of parliament with a mission to provide housing finance to the low and middle income segments of Sri Lanka. The bank is a public-private sector partnership with a majority state ownership; and it is the only state bank that’s listed on the Colombo Stock Exchange (CSE).
Moreover, given its state-private sector ownership, the bank enjoys benefits such as stability due to the former and increased efficiencies thanks to the latter – and a high level of governance and transparency since it is listed on the CSE.
With an average ticket size of Rs. 400,000, HDFC Bank caters to consumer segments that are usually overlooked by larger banks while maintaining its economic viability.
Q: In terms of the banking sector, what challenges does the bank face?
A: There are several challenges emanating from transacting with low and middle income segments – for example, high default rates and the risk of non-performing loans (NPLs). Based on this risk-return relationship, we should charge higher interest rates to absorb the greater risks there are to maintain the viability of operations.
Another challenge refers to the concentration of the portfolio with nearly 80 percent of lending being to the housing segment.
To mitigate this challenge, we have commenced diversifying into leasing, and gold and business loans, in addition to building a more balanced risk profile while staying true to our mission.
Q: As for the state of business in the country, what is your assessment of it?
A: The banking industry is overcrowded with more than 30 banks along with more than 40 non-bank financial institutions competing in what is a relatively small economy.
Consolidation is necessary in the banking sector; this is taking place at a slow pace and is likely to take several years.
The economy depends on labour-intensive sectors such as workers’ remittances (mainly from low skilled workers employed abroad), ready-made garments and tea. However, this model cannot be sustained with increased global technology based competition undermining the nation’s attractiveness among investors.
We must move towards more technology and capitalintensive industries to create a higher yielding economy similar to that of ASEAN countries. Moreover, Sri Lanka must gear itself for the fourth industrial revolution that is spreading across the world by educating and training youth on subjects such as AI, automation, robotics and big data analytics.
Q: To what extent are innovation and technological changes impacting financial services?
A: The banking sector is evolving rapidly in the digital age. Withdrawals and deposits are possible through ATMs with customers no longer having to visit their own banks.
All ATMs support withdrawals from multiple banks, which bodes well for customer convenience. Internet banking further enhances the customer expeprience while cheque clearing is completed in a day across the island thanks to tech advancements. Realtime payments are now possible through the Common Electronic Fund Transfer Switch (CEFTS) system, which is secure and easy to access on the go by using a smartphone.
In addition, the sector has strengthened its information systems security (InfoSec) to ensure secure transactions using technologies such as firewalls, log monitoring, encryption, vulnerability assessments and penetration testing.
Q: And HDFC Bank’s short to medium-term plans are…?
A: HDFC Bank is going through a period of consolidation with a focus on credit risk management, strengthening its recovery function and improving the NPL ratio. Steps have been taken to improve the quality of new loans granted while recovering existing bad loans. Internal operational efficiencies are being enhanced through a combination of centralisation, automation and implementation of paperless processes. Moreover, internal communications have been improved, which results in better teamwork and togetherness.
Future expansion will be pursued through digital means, thereby creating greater convenience for customers across the nation.