A Layman’s Guide for New Banks of 2014 (A Bank for a Buck)

I recently read “A Bank for the Buck”, a “biography” of HDFC Bank, by Tamal Bandopadhyay, one of the most eminent business journalists in India. This was his first book, and from the ease with which words and stories flowed in this one, I am sure this is the start of a new career for him.

Anyways, coming to the book, this was an amazing way to narrate the history of a company, and I am sure that soon, there will be copy-rights on similar stories for the other new-age companies which have made it big – RIL, Infosys, TCS, Bharti Airtel, ICICI Bank – all, children of liberalisation (well, RIL and TCS were there in the dark ages as well, but they really took off only in the last 20 years). Possibly, one of the better pharma companies as well, like Sun Pharma.

Moving on to HDFC Bank, seems that the founding team members really enjoyed building up this world-class institution – the passion in each of them really screams out of each page of the book in the first half. I am not sure as to how many of the Dirty Dozen are still around in HDFC Bank, but that doesn’t matter – wherever they are, they must be remembering that stint with relish.


Some interesting points from the book (and you will have to read the book for many, many more)…

  • The initial story of training people under a Pipal tree and wires stuck with scotch tape on the floor of the make-shift office reminds many of us of our start-up days in different companies.
  • Aditya Puri’s style of hiring his A-team sounds incredible – while interviewing, he made it sound as if the person needed HDFC Bank more than the other way around – possibly, coming out of his confidence that they were going to build a huge institution.
  • Most of the founding members were people who were working in foreign banks – takes us back to that era to remind us that foreign banks have been around much before the advent of the new private banks (starting 1993). Citi, HSBC, Stanchart, BankAm and even Barclays were the hunting ground for talent for HDFC Bank (and am assuming for ICICI Bank also). Hence, culture and processes of HDFC Bank should be somewhat similar to that of the foreign banks – but, I don’t think I have heard of such a thing from the people I have met in the past five years.
  • The transformation of HDFC Bank from an uber-urban bank to a mass-diversified-rural bank in recent years has been really well brought out. That story still has to pan out in real life, and am sure Aditya Puri can have another book written about that part, five years down the line.
  • Importance given to selecting and implementing the IT system – the core banking solution – is amazing. This is leadership vision at its best – has proved to be a differentiator for them. The rural foray and the march towards financial inclusion might well be predicated on this.
  • The journey of a successful business model of a diversified bank has been captured well – HDFC Bank started off with corporate banking, a relatively higher profit business, which fed the increasing Urban Retail business later on with positive cash-flows, till Urban Retail acquired critical mass. Then, Corporate and more Urban Retail started feeding the Rural Retail & Inclusion piece with their positive cash-flows. This will continue till Rural Retail & Inclusion becomes profitable on its own – various business model innovations might have gone into that part by that time. This is the journey of many a successful diversified company – minimise front-ended operating losses by setting up multiple sub-businesses in a smart, staggered fashion!
  • Finally, the common larger purpose of “Ab desh ki seva karo” which Deepak Parekh tells Puri while hiring him, also is a subtle but very important theme. This is so because as people start becoming more senior, they need to find a purpose larger than increasing profits or adding value to shareholders.

A few things which could have been brought out a bit more :

  • A bit more about the financial services environment (or at least banking) – summary of what was happening in the other relevant banks – ICICI Bank, IndusInd, SBI – how were they looking at HDFC ?
  • Is there a similar big story in ICICI Bank also ? They are no also-rans
  • How were the HDFC Limited Board Members reviewing HDFC Bank and giving directions? – am sure there must have been directions, reviews, questions, possibly board-room tussles
  • How do their customers look upon HDFC Bank ?

But possibly, the above points might have been left out to make the book more human, and not convert it into a comprehensive Business Strategy Document!

Moving on to the environment today, this book fits in completely as new banking licences are going to be awarded soon. Industrial houses and NBFCs are making a bee-line for the licences (well at least if 24 constitutes a bee-line). Some of them have some sort of a set-up in financial services. They might be more than green-field. Some others may be setting up completely green-field operations. Also, some of the 13 Old Private banks might be forced to turbo-charge their Business Plans and consequently their Management Team to stay relevant in the increasing competitive place. Finally, the 6 “New” private banks – HDFC, ICICI, Axis, IndusInd, Kotak, Yes – might also have to re-think their strategies in light of the new upstarts coming in (recall what happened to Airtel, Vodafone, Idea after Uninor, DoCoMo, MTS came in – well, actually, not much, but only after going through the first 2 years of turbulent upheaval).

Some of the 2014 licencees might want to use Tamal’s book as a rough guide for setting up a new bank. I don’t think that’s a good idea – because, each Bank will have its own identity, own way of working, and own Team – there won’t be any book for that. The book comes post-facto…and that too, not for all companies!!!

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