When it comes to investors or borrowers, HDFC is the gold standard. The mortgage lender is ET's Company of the Year 2020. How did it manage to stay steady when the entire financial market was shaky? When everyone feared defaults, customers kept paying back HDFC. Keki Mistry, its CEO, tells Joel Rebello and MC Govardhana Rangan how the institution navigated the Covid challenge. Edited excerpts: HDFC as an institution has done well irrespective of the challenges? How and why?We have never been short-sighted in our approach. We have never targeted short-term market share gains at the cost of stability. Importantly, we have laid a lot of emphasis on our risk management practices. As an organisation, we do strongly believe that the best risk management framework is one that fortifies the balance sheet in good times so as to create sufficient ammunition to tackle a downturn. Of course, there should be absolutely no compromise on ethics, integrity and governance. Lenders are always comfortable providing funds to us. Questions were raised on the liquidity issues faced by the smaller NBFCs, but in fact we were the beneficiaries of that situation. This is because it meant more funds were flowing to us through deposits, market borrowings or term loans.Last year was a more challenging year…At HDFC, we realised the magnitude of the crisis. An area which we started to focus on intently due to Covid-19 was digitisation. In fact, in the housing finance space, we were the first to lay emphasis on online processing during the lockdown. We focused on an online digital platform for loans and retail deposits, initiated ‘HDFC Customer Connect’ for customer requests, and launched virtual offices for customer services.Also the demand picked up unexpectedly…September 2020 was an inflection point as we continued to see demand pick-up much faster than anticipated earlier. Our year-to-date retail disbursements not only continued to improve month on month since the lockdown, but more importantly, from September onwards there has been a consistent growth. At present, disbursements continue to surpass the previous year’s corresponding monthly numbers.Interest rates are at record low, boosting demand. How long will that remain?This is one of the best times to buy a house. Interest rates are at an all-time low and it is unlikely that we will see a further decline in rates. Property prices are as low as they can be, and prices are not expected to go down any further. Real estate developers are willing to negotiate to close out deals. Incentives such as tax deductions, subsidies and stamp duty cuts by states like Maharashtra and Karnataka are helping. From what I understand, treasury collections for these governments from registrations have increased, inferring that strong home sales have more than compensated for the lower stamp duty. Whenever there is a change in rate cycles, the question of HDFC and HDFC Bank’s merger comes up...I can categorically say that in more than five years now we have had no discussion formally or informally for a merger with the bank. The biggest challenge to the merger is the cost of providing the CRR and SLR on the existing balance sheet and, more importantly, the priority sector because this balance sheet was not created out of CASA deposits but out of long-term deposits. So if there was some regulatory concession made available to us it is something we will evaluate and look at that point of time. But for the last six or seven years, we have had no discussions about merger. 81521909HDFC has always commanded a premium in the market despite being a unifocal business. What is the reason for that?The key reason is that HDFC is assessed by investors as a financial conglomerate and not just as a mortgage player. If you see, over the years we have promoted a number of companies engaged in financial services — bank, life and general insurance, asset management, venture capital, property funds and education loans. As regards our unlisted companies, we will look to list HDFC Ergo and HDFC Credila at an appropriate time. We have always believed in and will continue to focus on prudent lending — there is no substitute to prudent lending.Both jobs and salaries faced cuts. Will that negate the incentives to buy a house?Job cuts were initially predicted to be high, but they have not been that large. The cuts have come mostly from sectors that have been impacted. Most sectors have rebounded not only to pre-pandemic levels but due to the unleashing of pent-up demand, these sectors are showing higher growth than prior to the pandemic. Sectors that have been impacted are hotels, aviation and hospitality or SMEs that are linked with these sectors. There were salary cuts, but most companies have restored the salaries of their employees based on the recovery.
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