HDFC is known for its sound value system!
3^rd Feb 2010

 

Q. The said report also mentions the variability in signaling rates ( repo rates or reverse repo rates). They have mentioned that when interest rates increase PSU PLR increase only with a lag while when interest rates drop, the PSU PLR drops much faster than the signaling rates. So a consumer thinks that a PSU bank will always give me a cheaper deal. What do you have to say on that?

That is why I say that ideally rate should be linked to G-Sec benchmark and not to the repo or reverse repo rates.

 

Being a 30-year old specialized institution, what specialization do you offer to consumers?

We have many different products in our portfolio like Step-up payment product or similar structured products, but at the end of the day what we have noticed that average middle class Indian does not want to borrow more than what he can actually service. He thinks that by doing all this he is over committing and over leveraging himself which may create trouble for him later.

Coming to recovery part, like most players, we have not outsourced this function . Our own people undertake the job of recovery. We have seen in our 30 years of existence that our customers primarily representing middle ladder of the society, sometimes fall back on loan, owing to any eventuality like major illness in the family etc. As the tenures are in the range of 15-20 years, there will be such times when one can fall back on payments. But we do not take drastic action against him like removing him from his house. We take a complete look at his problem and work closely with our customers to provide solutions.

We firmly believe that in the long run, the goodwill which we have build with our customers will take us through.

Q. How do you help a customer handling the loan in case of his/ her job loss?

If he has a genuine problem like this, we will find the way out. We do not mind rescheduling also in extreme cases.

Q. Switching of loans has been made extremely difficult. Please comment.

Switching of loans is not difficult. There is a charge levied by all institutions which is maximum 2 percent. We charge this money because when we pre pay our loans we also have to pay prepayment charges which are some times the differential between the interest rate we are paying and the current rates which in some cases turnout to be more than 2 % . This way there is an economic rationale in the prepayment charge levied. If you have a transparent mechanism, then it will reflect in the cost of funding also. So when any one comes with prepayment cheque, then we do not hold his documents and release them in the shortest possible time, but yes it cannot be done over the counter as the cheque needs to be realized. You will also appreciate that there is a cost of acquisition of the customer.

Q. How do you view the competition from the banks who have become very active in the area of home loans?

This is not new to us. Competition has been there all through particularly in early 2000 ( 2001 – 2004). Every bank in the country, be it PSU banks, Private Sector bank or foreign banks were aggressive in this segment then. Now it is happening again. But this aggression should not lead to other issues some of which we have seen in the west during 2008 -09.

 

You have just bought a stake in a Credila - an Education loan company . Do you see a huge potential there. Why have you entered this area through a different Company.

We feel that education is very important and with HRD Ministry’s renewed focus, we are surely looking at that in a major way. As mentioned earlier given the demographics of our population education across all levels will be a growing area. Every parent wants his child to get educated as much as possible. Education loans is a specialized area and the company providing these loans need to understand the entire education system both locally and internationally, the type of courses that are available, the demand from industry for students having particular skills etc. Hence we thought of doing it through a separate company. Credila is a specialized company which has been around for couple of years. Yes, this company will be able to leverage HDFC’s infrastructure and of course the HDFC brand.

 

About HDFC>>>

Incorporated in 1977, HDFC the pioneer of housing finance in India has assisted more than 3.3 million families to own a home of their own, through housing loan approvals of over Rs.2.4 trillion. Their objective, has been to enhance residential housing stock and promote home ownership HDFC has been described as a model housing finance company for developing countries with nascent housing finance markets. It has provided technical assistance in Bangladesh, Sri Lanka and Egypt and has undertaken consultancy assignments in various countries across Asia, Africa and East Europe.

It has been recognized among India’s Best Managed Companies and has emerged as a financial conglomerate with the group’s presence in the entire gamut of financial services including banking, asset management, insurance (life & general), and a real estate venture capital company. It has partnered highly reputed International organizations for most of its businesses. Standard life Investments of UK is its partner in the Asset management Company, Standard life assurance co plc of UK is the partner for its life insurance venture , Ergo of Germany , a Munich Re group company is its partner for non life Insurance. The HDFC group has an asset base of over Rs 4 trillion and a customer base of around 30 million.

Their objective, from the beginning, has been to enhance residential housing stock and promote home ownership.