What is the vision in the next five years?

I see huge growth in every

RELATED ARTICLES Homes most affordable in 30 years: HDFC HDFC down 3.71%; m-cap erodes by Rs 2,456 cr MSCI's weighting action incorrect: HDFC HDFC Q4 net up 16% at Rs 1,326 cr

activity we are involved in. In 2000, mortgages as a percentage of outstanding bank loans were 1.5 per cent, and in 2010, it is 10 per cent. In the next 10 years, this is expected to grow eightfold from Rs 5,00,000 crore to Rs 40,00,000 crore of outstanding bank loans.

There is a huge opportunity. We have not even scratched the surface. Mortgages as percentage of outstanding loans will grow eight times. Half a dozen reputable companies such as Godrej, Tatas and Mahindras are getting into home construction because they believe mortgages are a huge business opportunity due to the demand. The government is focusing on affordable housing. So the core business of home finance will grow.

In all sectors where we are operating, there are huge growth opportunities. Wealth management is in its infancy in India and there are more Indians today with larger disposable incomes. Asset management business is going to grow manifold. For HDFC Bank, financial inclusion is the next big opportunity. The bank that succeeds in financial inclusion will have a much better growth, as it is a big market with no access to credit. Insurance penetration in India is very low. It gives industry players huge potential to grow.

Two private entities — ICICI Bank and HDFC — took different approaches to growth. ICICI grew more aggressively, taking advantage of the reforms, and HDFC grew cautiously but steadily. When you look back, would you say it was a missed opportunity?

It is better to be slow and steady. We have no regrets about not growing faster. I think we can grow only up to the extent that we can manage the growth. Managing growth is also very important. We are lending retail, it is not bulk lending. At 25 per cent growth, the amount of paper work, the legal work, inspecting properties and individual appraisals is a huge task.

ICICI is a very old institution, over 50-60 years old. We are 33 years old. We don’t compare ourselves like that. In licence raj, you could determine who your competitors would be, and you could stop new licences. Today, in the liberalised economy, anyone can be our competitor and start a housing finance company. Banks, insurance companies, NBFCs and even developers provide home loans.

Imagination, HDFC believed, was more important than strategy. Why?

It meant thinking big. The reform process , which started in 1991-92, threw up opportunities. RBI advertised for private sector banks in 1992. It said HDFC could not be a bank, it had to be a brand new licence. We applied for a licence and became the first batch of banks to get a licence in the private sector. Later in 2000 we got life insurance licence. For decades India just had one Life Insurance Corporation and one mutual fund. There was one General Insurance Corporation and there were no new private sector banks. We took advantage of the opening up of the financial sector and got into each line of financial business.

One aggressive pricing strategy by SBI and you lost a chunk of your customer base. How do you combat the aggressive stance of public sector banks?

Despite SBI’s aggressive pricing strategy our growth rate continues to remain around 25 per cent. We don’t think it has taken away our customers. When SBI was not around, we were growing at 25 per cent. When SBI came out with its aggressive pricing strategy, we are still growing at 25 per cent. Between the three of us (HDFC, ICICI Bank and SBI), we have 75 per cent of the market share. If you take our outstanding mortgages (around Rs 1 lakh crore) vis-à-vis total outstanding mortgage (around Rs 5 lakh crore), we have a 20 per cent market share.

You often say that some failure in life is inevitable. And harder you work, more mistakes one tends to make. What was HDFC’s biggest mistake?

I made many mistakes so I don’t know where to begin. I don’t think we needed a NatWest Bank when we started HDFC Bank. We could have run the bank ourselves. Then we would have had 40 per cent shareholding. The bank created a huge value which we gave it away on a platter to someone else like NatWest. Ironically, in the first two years, NatWest got into trouble in the UK and it began shrinking its international business. In two years, buying back Rs 10 shares at Rs 70, we thought, was very expensive. This is another mistake we made. There were lots of strategic mistakes. But these mistakes were made because we did not want to take higher risks. The bank’s paid-up capital was Rs 200 crore, HDFC’s paid-up capital was only Rs 100 crore. So we were promoting a bank that was twice the size of our capital. So we had to mitigate our risk.

manjuab@mydigitalfc.com