HDFC Bank is seeing greater business opportunity in wealth management from tier-II and tier-III

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cities and towns. Abhay Aima, group head of equities and private banking of HDFC Bank, told Rajendra M Palande and Sneha Shah in an interview that the bank plans to expand to more than 40 towns next year using the hub-and-spoke model to capture this emerging opportunity. Excerpts

How big does the semi-urban market look like? How different is it from the urban market?

The potential is huge. We can see an increasing number of people in tier-II and tier-III cities having investible surpluses. The concept of financial planning is also getting ingrained in the otherwise typical mindset of those people.

If they were putting money in bank fixed deposits, gold and land assets earlier, they are opening up to the concept of investing in equities, mutual funds and real estate funds.As far as their difference from the urban customer is concerned, there is not much difference because for a typical Indian head of the family, the responsibilities and needs are the same in every stage of life.

How are you breaking into that typical mindset of Indians in tier-II and tier-II cities?

People have always perceived investing in equities as something similar to satta bazaar (speculative market). A subset to this thinking can be the systematic investment plan that gives a small exposure to equities. Also, the typical post office schemes where people put Rs 100 a month can be replaced by the monthly mutual fund plans. Similarly, the traditional way of investing in gold can be substituted by other structured products, such as gold ETFs (exchange-traded funds).



How do you plan to break into the market where many established foreign players are already present?

These players do not understand the Indian market better than us. You cannot pick up a successful model from one market and replicate it in India. India is like 17-18 different countries and hence such models don’t work here.

They cannot differentiate between the mindset and profile of a 40-year-old north Indian, a 40-year-old Gujarati and a 40-year-old South Indian. This is where we think we specialise in. We have the skill sets to advise them better. Also, we don’t let our relationship managers (RMs) advise customers.

We feed in the recommendations centrally for every customer profile and if there are any variations, we negatively penalise the RMs because we don’t want misselling. Also, the other players have got their cost structures wrong and that is where we score. With three years of experience behind us, I can safely say that our cost structures are sustainable.



How have you got your cost structures right?

We have not created a different set-up in itself for this business and, hence, that has not added to the cost. Also, we do not ask our people to leave in six months if they have failed to achieve targets. Hence, the cost of losing and acquiring employees is also low. The reporting structure is also not complicated like for other players in the market. This, too, helps us save costs.

Which are the asset classes that you sell? What are your growth plans?

We cover asset classes such as equities, mutual funds, insurance and structured products like gold ETFs and real estate funds. We are already present in 29 locations across the country.

We plan to adopt the hub-and-spoke model and add two-three locations to every hub over the next financial year. Say for example, we will use our presence in Pune to service customers in Satara and Kolhapur.

What is the market outlook going forward?

Considering India is slated to grow at more than 6 per cent annually and industrial growth is typically twice the gross domestic product (GDP) growth number, logic says the stock market indices will rise by 15-17 per cent annually.