HDFC Bank is now a small fish in a big pond

livemint.com:

In 1991, when India kicked off its economic liberalisation in the aftermath of a crisis, the government requested a committee headed by former governor of the Reserve Bank of India, M Narasimham, to submit a report on banking reforms. The committee’s report outlined the future trajectory of banking in India while making a strong case for limiting the number of large banks to four.

Three decades later, the contours of that are emerging with the rise of a giant. HDFC Bank has merged with the country’s top mortgage lender, HDFC, which originally promoted the bank in 1994.

There is of course State Bank of India, but the new entity, with a market capitalisation of $172 billion, now figures in the list of the world’s most valuable banks, occupying the fourth spot after JPMorgan Chase, the state-controlled Industrial and Commercial Bank of China (ICBC) and Bank of America. This reflects the success of institution-backed lenders after liberalisation compared to their state-owned peers, which are still saddled with structural weaknesses, and shows that India’s banking regulator has been far more successful in pushing private banks on reforming governance.

But more than that it reveals the success of a business model centered around building a retail portfolio and low-cost current- and savings-account deposits, providing stability over a long period, a focus on technology, robust systems and a strong management information system. Importantly, the success is due in no small measure to its leadership, starting from Aditya Puri and now his successor, Shashidar Jagadishan, and its ability to resist pressure during the go-go days of lending a decade ago.