Origins of Brand HDFC
Housing Development and Finance Corporation (HDFC Ltd) which merged its child HDFC Bank in July 2023, epitomised excellence. We discuss some of its traits which characterized HDFC as a role model.
Housing Development and Finance Corporation or HDFC Ltd as it was known was a pioneer in many ways and epitomised many traits that today are called as hallmarks of Excellence. On 1st July 2023, HDFC was merged into its child HDFC Bank. And on the 2nd anniversary of its ceasing to exist as an Independent company, we recall of the key traits of this pioneer and role model.
In this post, we are not discussing financial achievements of HDFC Ltd where it demonstrated solid performance for a very long time and was a benchmark in its Industry and India Inc. This performance however had its roots on key traits which we discuss.
Pioneer in its Business
1977 was a period when there were no housing loans available in India. Most people would save their lifetime working and towards the end of their career build a home of their own from the accumulated savings. Mr Hasmukh Mehta who retired as the Chairman of erstwhile Industrial Credit and Investment Corporation(ICICI) asked a question to himself, “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?” His lifelong dream of helping Indians own their home led to the formation of the Housing Development Finance Corporation Limited (HDFC) in 1977 without any financial assistance from the Government of India, thus creating as a milestone in Indian financial history. It was the passion to fulfil that dream that was the bedrock for the traits that HDFC embodied. His dream of providing better housing and living conditions for people was accomplished with an organization that was modelled on its international peers but was Indian at heart.
Customer centricity
Today term is a slogan in every company, and in most it remains a slogan. In HDFC Ltd. it was a treasured value on which the organisational culture was built. HDFC defined its business, not lending or providing loans or financial services, but one of fulfilling a core dream of an average Indian, of owning home of its own. In HDFC this was however not just in defining the mission statements, but part of the organisation working. Every employee training programs was rooted in making sure the employee internalised that he/she is not just doing a job, but is helping fulfil the core dream of every Indian. This was embedded in the way of working through every process and in every interaction with customers. "Buying a house is a family’s biggest investment in terms of acquisition cost. They run from pillar to post to meet the balance requirement and have so many questions,” according to Deepak Parekh, chairman HDFC. Employees at HDFC are encouraged to listen to each family's worries and attempt to address them, such as whether they can trust the builder or are paying the proper price for their home and more. He added that the home loan business in India requires "immense patience" and is about "understanding the needs and feelings" of a customer.
HDFC Ltd for a long time had a dedicated section in its Annual Report on Customers. There is no requirement in the law even today and very few companies if at all have this section.And the definition of Customers extended to Fixed Deposit holders who were the main source of funding for HDFC Ltd. HDFC Ltd treated them and serviced them better than any of the peers including its own child HDFC Bank.
On July 1st, 2023 when HDFC merged with HDFC Bank, there was a joint statement from Mr Deepak Parekh - Chairman HDFC Ltd and Mr Sashidhar Jagdishan, MD&CEO HDFC Bank - “HDFC has been much more customer centric as compared to HDFC Bank. The culture of the merged entity will be that of HDFC Ltd. and not HDFC Bank. Preserving the "HDFC way of working" is an agreed tenet of the HDFC-HDFC Bank merger,”
Employee Focus
When HDFC started in 1977, it was perceived as a possible risk. Also Home loans at that time and even today have lowest margins in lending. Hence the ability of HDFC to pay high salaries was impossible. It wanted to however attract the best because at the core of realising its dream, was people. The best of finance professionals in India in those days were working with foreign banks in India or a hub like Singapore with high salaries. HDFC followed 3 pillars:
Mr H T Parekh, never underestimated the power of teamwork. He believed that the success of an organization was possible only with a group of dedicated professionals who shared a common goal to serve, and were willing to take reasonable risks
Empowerment - Getting a loan sanctioned in those days could take a long time and HDFC wanted to reduce that time. Hence in every city, it had senior people who were empowered to sanction loans of different values with the General Manager of the city operating like a local CEO. This empowerment process not only speeded the process but also motivated professionals to join HDFC Ltd as they perceived empowerment with progress in their careers
HDFC knew that it is not just enough to attract talent but also retain them to ensure that the customer centric and empowerment culture gets percolated and embedded. At the low salaries that it could afford to pay, it would have been impossible. HDFC was one of the earliest pioneer in providing ESOPs to as a tool of retaining talent.
Usage of Technology
Today BFSI is synonymous with Technology, But HDFC Ltd was again a pioneer is using technology in late 80s and 90s a period when core banking system was more of a name than being used by Banks/NBFCs. In the early 1990s, HDFC was a benchmark for NBFCs wanting to use technology for operations. It was not just Technology, but also usage of tools like Business Process Engineering before automation. Today any case study on Digital transformation will tell you this, but HDFC was already doing this in early 1990s.
Some of the features that HDFC had for ease of transactions for deposit holders, HDFC Bank does not have it even today. And HDFC Ltd as of 30th June 2023 had close to Rs 7 lac crore deposits much larger than many PSU and Private Banks.
Brand HDFC
What does HDFC Brand mean to an ordinary Indian? TRUST. In the financial services sphere, it is not easy to earn and more importantly maintain trust while growing big. HDFC grew manifold while being strongly rooted in the principles of integrity, transparency and professionalism. The Trust factor was the enabler for Rs 7 lac crore deposits even when the company did not have the DICGC protection of Rs 5 lacs (which is only for Banks). A key segment of deposit holders were middle class senior citizens who invested their hard earned savings and trusted HDFC for reasonable returns. And all this in an era in the 80s and 90s when large number of NBFCs were started and closed after deceiving depositors.
It is this trust factor in HDFC brand that led to the formation and growth of HDFC into a financial conglomerate spanning HDFC Bank, HDFC MF, HDFC Life, HDFC Ergo, HDFC Securities all nurtured in their formative years under Brand HDFC way of working. These institutions under the guidance of parent HDFC ensured that the core principles were not compromised. Today all are very large players in their respective spheres thanks in no small measure to what Brand HDFC stands for.
Leadership walking the Talk
What we talked about can be found as success principles in text books. But in HDFC they were lived and executed on the ground all the while growing exponentially. This sustained execution of the above was possible due to a dedicated team of leaders that Mr H T Parekh attracted to HDFC in its very early years. Amongst the first people who joined HDFC was Mr Deepak Parekh, nephew of Mr H T Parekh, who left his high paying job in Singapore to join HDFC. Mr Deepak Parekh was the Chairman HDFC, just before the merger. There were other key people like Mr. Keki Mistry, Ms Renu Sud Karnad and Mr Nasser Munjee all of whom joined HDFC in the first 3 years of the company and worked for 40+ years at HDFC, apart from a large pool of Senior General Managers and General Managers. The Leadership walked the talk and did not stray from the founder’s commitment and principles. And they were supported by an illustrious Board consisting of Mr Keshub Mahindra, Dr J J Irani, Dr S A Dave to nurture the brand. The leaders never in any of their public interactions ever conveyed that they are bigger than the Brand HDFC. If anything it was a a custodian of Brand HDFC and legacy of the founder Mr H T Mehta.
On a parting note: HDFC Bank had become a bigger entity than parent and this led to a perception in the then leaders at the Bank, that they are bigger than the brand HDFC. The reality is that for a long time since it started, HDFC Bank was preferred by people as it had HDFC brand supporting it and hence trust that the money was safe. The “owner” of Brand HDFC is now HDFC Bank. We do hope that the current and future leaders at HDFC Bank perceive their roles as custodians of Brand HDFC and continue to enhance the brand value of HDFC equals trust.
We do hope you have enjoyed reading this issue of The Chai and Charts Chronicles. If you like it, please share the same with your friends and colleagues and if you have not liked it, please share the feedback with the author at menghrajani1@gmail.com
In case you would like to read our earlier posts, you can read them by clicking here.
Nice way of conveying the legacy of such a big name.