HDFC Bank (HDB) - 2020 Q4 - Annual Report

Economic Overview - The Indian economy's GDP at current market prices was estimated at Rs. 203.4 trillion for fiscal 2020, up from Rs. 189.7 trillion for fiscal 2019, indicating growth [30]. - India attracted approximately US$ 73.45 billion in foreign direct investment (FDI) in fiscal 2020, compared to US$ 62.0 billion in fiscal 2019 and US$ 60.9 billion in fiscal 2018 [30]. - The ease of doing business ranking for India improved by 14 places to 63rd out of 190 countries in 2019, marking it as one of the top ten improvers year-on-year [30]. Currency and Economic Conditions - The Indian rupee depreciated by 6.3 percent against the US dollar in fiscal 2019, with a range between Rs. 74.4 per US$ 1.00 and Rs. 64.85 per US$ 1.00 [20]. - In fiscal 2020, the rupee ranged between a high of Rs. 76.37 per US$ 1.00 and a low of Rs. 68.40 per US$ 1.00, reflecting weak global demand and low domestic economic growth [20]. - The bank's financial conditions are significantly influenced by general economic conditions in India, which is one of the largest economies globally [30]. Banking Operations and Strategy - The bank's strategy focuses on providing a comprehensive range of financial products and services through multiple distribution channels, emphasizing high-quality services and advanced technology [28]. - The bank's principal business activities include retail banking, wholesale banking, and treasury operations, with a wide array of products and services offered [29]. - The bank aims to be the preferred provider of financial services across metro, urban, semi-urban, and rural markets in India [28]. Financial Performance - The company's total assets increased from Rs. 13,280.1 billion as of March 31, 2019, to Rs. 15,961.9 billion as of March 31, 2020, reflecting a growth of approximately 12.7% [36]. - Net income rose from Rs. 220.1 billion for fiscal 2019 to Rs. 260.3 billion for fiscal 2020, representing an increase of about 18.2% [36]. - The return on equity for fiscal 2020 was 15.1%, compared to 15.5% in fiscal 2019 [36]. Asset Quality and Loans - The gross non-performing customer assets as a percentage of total customer assets was 1.43% as of March 31, 2020, while net non-performing customer assets constituted 0.52% [36]. - As of March 31, 2020, retail loans accounted for 66.3% of the company's gross loans, with unsecured loans making up 32.9% of the retail loan portfolio [72]. - Personal loans and credit cards constituted 26.8% of the total retail loan value, amounting to Rs. 1,920,601.6 million (US$ 25,475.5 million) [74]. Digital Banking and Technology - The company has implemented a digital banking platform, Backbase, to enhance customer experience across multiple channels [47]. - The company is focused on developing new technology and improving digital aspects of its business, including applications like SmartBuy and PayZapp [48]. - The company has developed more than 150 APIs for partners since expanding into API banking in 2018, enhancing its digital offerings [54]. Customer Engagement and Services - The company has over 5.6 million customers engaged through virtual relationship management (VRM) and has implemented AI technologies through its virtual assistant EVA [49]. - The company provides telephone banking services in 2,803 cities and towns as of March 31, 2020 [151]. - The mobile banking application is designed to enhance customer experience with secure access and multiple features [152]. Infrastructure and Expansion - The company has invested Rs. 103 trillion in infrastructure development over the next five years as part of the Indian Union Budget for fiscal 2021 [34]. - The company plans to continue expanding its banking outlet and ATM network, subject to regulatory guidelines [71]. - As of March 31, 2020, the company had 5,416 banking outlets and 14,901 ATMs/CDMs across 2,803 cities and towns, with an additional 5,379 banking outlets managed by CSCs [52]. Regulatory Compliance and Risk Management - The Bank's exposure limit for a single borrower is set at 20.00% of the Tier 1 capital base, with potential exceptional increases up to 25.00% with Board approval [174]. - The Bank employs a three-tier credit approval system to ensure diversified risk management, requiring multiple approvals based on borrower grading and facility size [173]. - The liquidity risk management process includes both flow and stock approaches to track cash flow mismatches and measure critical liquidity ratios [202]. Tax Contributions - In fiscal 2019, the company collected Rs. 3,156 billion in direct taxes and Rs. 2,076 billion in indirect taxes for the Government of India [134].