HDFC Bank To Invest 7–8% Net Revenue On Tech Spends

Profitability will return to the level where HDFC Bank has always been, CEO Sashidhar Jagdishan said.

<div class="paragraphs"><p>An HDFC Bank branch in Mumbai. (Source: BQ Prime) </p></div>
An HDFC Bank branch in Mumbai. (Source: BQ Prime)

HDFC Bank Ltd. will be investing 7–8% of net revenue in technology, Chief Executive Officer Sashidhar Jagdishan said on Friday.

With digital being the focal point, the bank expects investments in technology to be one of its top priorities in the near future. The lender also saw 95% growth in digital financial transactions in the previous fiscal.

In terms of concerns that come with rapidly advancing technology, Jagdishan said the bank's board and management were aware of the kind of threats the cyber world possesses. "As we move more towards digital platforms, the vulnerabilities will increase."

"The kind of investments and focus that we have on trying to fortify our systems and vulnerabilities is the topmost priority," Jagdishan said at the bank's first annual general meeting after the mega merger with Housing Development Finance Corp.

"I won't say it will be foolproof. Nobody can do that. But ours will be much better than several others, not just in India but globally," he said.

The bank is also enhancing security on its platforms. PayZapp 2.0 is one of the flagship products that offers customers a variety of payment options.

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The Mega Merger

Jagdishan, who previously elaborated on the possibility of creating a new HDFC Bank every four years, also said that the merger won't be easy.

While appreciating the bank's 28-year-old legacy, inherited from Deepak Parekh, the CEO said that the risk of the merger was the funding part. However, he highlighted that the entire team at HDFC Bank saw it as a wonderful chance and was confident about this opportunity.

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On HDFC Bank's Performance

HDFC Bank's net profit for the quarter stood at Rs 11,951 crore, up 30% year-on-year. The lender's core income, or net interest income, also rose 21% from a year ago, and the net interest margin stayed flat sequentially at 4.3%.

At a time when the Indian banking system's NIMs have started showing signs of slowing down, Jagdishan said HDFC Bank's NIMs were also expected to drop in the second quarter of the fiscal.

We expect NIMs to drop in Q2, the results of which are expected in the later part of October. I assure that profitability will return at levels where HDFC Bank has always been.
Sashidhar Jagdishan, MD and CEO, HDFC Bank

Jagdishan said that with the merger, the lender aims to have a well-balanced mix of funding in deposits and bonds, which are very stable.

The bank has taken approval from members to issue up to Rs 50,000 crore of bonds, and even in the future, there will be a fair amount of bonds coming from the lender, he said.

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