HDFC Bank Limited (HDFCBANK) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Sanjeev Mohta from B&K Securities. Welcome all of you to another session of the Thought Leadership series. We have great pleasure -- we have a very special guest. We have Smita Bhagat from HDFC Bank. I'm sure all of you know her, but I'll still do a bit of introduction. Smita wears a lot of hats in HDFC Bank. And yes, she's been around in HDFC Bank for 22 years. And before that, in some of the -- with HDFC as well. Smita heads the government and the institutional business in HDFC Bank, but she's also played a very big role, and she is looking at the rural -- on the footprint of rural of HDFC Bank in India. And she's been instrumental in actually expanding that footprint quite a lot. And Smita is also in some of the boards like the CSC Board, the Common Service Center Board, and on the e-Grameen. So she has a lot of first-hand experience with her travel, with her knowledge of rural. So Smita, as we have spoken, what we'll do is we'll spend most of the time looking at the rural transformation from your eyes. You've seen all of this first hand. So we'll spend most of the time in that. But we'll also spend time in how HDFC Bank is playing the role in terms of how are they -- how is the bank capitalizing on this opportunity. So that's what we have. We also have Mr. Ajit Shetty from HDFC Bank. We have [ Jai Mundra ], our Head of Banking Sector Research as well. And if anybody has any questions, please put it in the Q&A box, we'll try and make sure that we ask these questions. So Smita, welcome. Thank you very much for joining and sparing your valuable time.

Thank you, Sanjeev. Good afternoon, everyone.

So Smita, I'll start actually with your personal journey first. So you -- and you've been traveling a lot despite COVID. You've been to all parts of India. So maybe you can talk about what are you -- how did you get into this whole rural banking? How -- and what have you -- how have you seen it over the last few years? Yes.

So -- let me start with the fact that I joined the bank when we had 52 branches. And today, we are close to 6,000 branches. So seeing how we expanded and what were our strategy, and rural is not something which we are talking about right now. The fact that HDFC Bank has 52% of its branches in semi-urban and rural, obviously, means that we spotted opportunity in rural much before. So for me, personally because I had this great privilege of looking after Bombay and Delhi, I mean the metros, as well as at the same time looking after states like Chhattisgarh, Rajasthan, Himachal, Punjab, Haryana, all -- in a way a combination of metros, rich states, poor states, et cetera. And when we were traveling and going in for branch expansion, et cetera, we realized that what were the opportunities in rural areas. If I talk about 2010, '11, when Gurgaon was growing, we were close to 18 branches in Gurgaon that time, starting from entry of Gurgaon and up till Manesar. And everyone who's aware -- been to Gurgaon knows that Gurgaon is expanding big time towards NH 8 towards the Jaipaur Rewari highway. And in few years' time, we were 109 branches in that belt, and we had 23% market share. In 2011 census, a large part of Gurgaon was rural. So the learning what we had is that if you -- within 25 to 50 kilometers of a city center and in the direction which it is growing, if you start putting in branch expansion and customizing products in those areas, you will see a good growth. Taking that example, we used to -- the rural branches used to get breakeven in less than 1 year's time, and that is the model which we started replicating in other states as well. The other thing is that one has to understand how our country is it. 60% to 70% population is in rural and semi-urban areas. If we have 6 lakh -- close to now 640,000 villages, 254,000 panchayats and INR 1.5 trillion economy in rural areas, can we afford to ignore? No, we cannot afford to ignore. But rural was always there. But how it became an opportunity is what has happened in the last 6, 7, 8 years that how penetration of mobile phone -- today, almost 150,000 panchayats are connected through optic fiber network, which means that WiFi and data is easily available there, available for people in those villages, which are attached to those panchayats. And that offers a huge opportunity and which was not there. Why would people not go into rural is primarily because it was a huge cost, increasing your physical distribution out there or travel there. There were not proper facilities, et cetera. But today, you can reach out those customers because they are as technology savvy or they are adopting technology in a similar fashion what we find in metro and urban. In very [Foreign Language] manner, people may not have enough to eat, but today, you may find a mobile phone in everyone's hands. So that is something -- traveling across the country, one was finding different opportunities. Then a chance meeting which happened in December '17 and early '18, where as a part of my government business, I met the Chairman of Common Service Centers. And his meeting got canceled and we started talking about what Common Service Centers were there because we had actually gone to launch FASTag through HDFC Bank. But when he spoke about that what Common Service Centers are and how they are completely on digital infrastructure. Just imagine you are talking about presence of these Common Service Centers in almost every panchayat in the country, and they are all on digital infrastructure, no paperwork involved. I mean, started -- made me and some of my colleagues very inquisitive. And they were set up to deliver government services to common man. And today, all of us know that government touches each one of us. I mean, we all have to make utility payments, electricity [Foreign Language], water [Foreign Language], whatever, so it touches -- we pay our taxes. So government touches everyone's lives. And they were actually set up to deliver government services to common man. And that is where when we visited some of them, we figured that government had started making some of them as BCs and the nationalized banks were utilizing them for opening Jan Dhan accounts, et cetera. But for all of us...

When you say BC, you mean some banking correspondent, right?

Yes. Yes. So...

Because BC -- I just want to make sure that I understand, yes.

Because they wanted to increase income of these village-level entrepreneurs who were running these Common Service Centers. So when we saw that nationalized banks have -- utilizing them for their -- opening Jan Dhan accounts, doing domestic remittances, payment of bills, et cetera, we thought why can't we -- when there is -- why can't we have product level APIs integrated with CSC so that all these village-level entrepreneurs can sell banking products through their outlets. And that is where serious journey began that how we can leverage adoption of technology in reaching out banking products to the last mile in the country. And honestly, here, technology changes were taking place, and that is where you saw the rural India changing. And both merged together, the opportunities just are immense. I'll just give you one example, a recent example. 3 weeks -- 2 and 2.5 weeks back, I visited a village called -- village, Maroli, which is in Sikar District in Rajasthan. And you will not believe that what was interesting seeing how 70, 75-year old were doing all their payments through UPI. They were buying online a laptop worth INR 40,000, which obviously made us realize that you can have a consumer durable opportunity, et cetera. And this is all a myth when we say that senior citizens, they may find difficulty in using online channels, et cetera. I think today, the younger generation and the older generation is far more tech-savvy, primarily because of the reason they have more time, they have more interest. And pandemic, when all of us were cooped up at our home, I think mobile was the biggest friend all of us had. And that is where you saw in rural areas, even all citizens, all age groups becoming savvy in using online channels. Gradually the demand for TVs -- I mean people are talking about instead of buying television, can I pay for Netflix or pay for other online streaming channels because I can -- even whatever I watch on television, I can do -- see there. So the data availability, optic fiber network reaching out to panchayats, et cetera, have thrown lot of opportunities. So this was...

Smita you were even saying that these people are also playing games like Dream11 and all that stuff, right?

Oh, yes. If you see in this IPL this year, if you saw some of the data that Dream11, what was happening across the country and where they were getting more customers, you'll be surprised the larger number were from rural areas. They may put in a small amount of money. And not only this, all the other games, which -- online games, and if you see the adoption in rural areas, one will be surprised. And that also is validated by the fact that we all know that all the e-commerce companies, a large part of their orders come from Tier 3 to 6 cities. And today, they are as much aware as we are because today, if I have my domestic help not using INR 1 of cash and making all payments through UPI, and he's only 4th class pass, I'm sure we all know what we are headed in future.

Right. So you -- let's talk a bit about VLE also, like the village level entrepreneur. So you talked about this Common Service Center and a lot of these are now run by the village level entrepreneur, what exactly is going on over there? That's a very interesting change also that's...

Yes. So let me tell you that -- I'll come step-by-step one to Common Service Centers and what they did in last 1 year and which could be very, very exciting for us to understand. So as I said in the beginning that they were started to deliver government services to common man, but then they started giving banking -- they started retail -- selling banking products by becoming banking correspondents, then they started selling insurance products, then later when government decided that if we have to create employment, why not connect more and more people to these common service centers, which can increase their income. So they started selling fertilizers of IFFCO. They started selling LED bulbs, et cetera. So -- and in a way, because anyone who runs their own business definitely needs a bank. And that is where -- as more and more products they were started selling, obviously, as bankers there -- as a -- from the bank's point of view, you saw increase in balances, capability of giving credit increase. But the most interesting thing which they did in last 1 year's time is when last year the lockdown happened, and it was very stringent at the beginning of the COVID. All of us in metros got our groceries and other essential products delivered at our home -- at our doorstep, what about rural areas because they were facing huge problems? Now Common Service Centers as a company saw this as an opportunity and they develop and they set up a company called CSC e-Grameen and they partnered with a startup and developed an app for these people who registered or converted them as CSC e-Grameen stores, where they could upload whatever was available locally. And in fact, even going and buying from wholesaler, Parley G biscuits, chips, essentials and vegetables and fruits from the local farmers, et cetera. And there was an app for the customer. The customer will download the app, order and within 5-kilometer radius they were delivering. You will be happy and surprised to know that today, we have 1.85 lakh such eGrameen stores. They have done 33 lakh orders and closed worth INR 500 crores already. And what is -- and they have 65 partnerships, and this has just happened in 1 year's time. They started last year -- they went full throttle last year, July, and we are in September right now. 65 partnerships. And what kind of partnerships which are very interesting and then I'll connect it to the banking. They partnered with -- so Tata Motors invested in them, HDFC Bank also invested in them. Now can you imagine a VLE selling car of -- from Tata Motors? So all the Tata products can be sold through the VLE. So even a Croma store products, which could be consumer durables, all that a VLE can sell. Now what has happened that it has increased distribution for Tata's, that today they didn't have presence in rural areas, at least in rural areas, there was somebody who can actually generate a lead for the product. And what was happening for the bank because we were digitally integrated, they would -- in rural areas, somebody needs a car and here HDFC was -- bank was there to give a loan. So it was a win-win situation for everyone. Tata Motors was able to sell their cars, HDFC Bank was giving them loan, and Village Level Entrepreneur was getting money or making money. Now this is -- on cars, they have tie-up with Renault and soon, I think they might have tie-up with Maruti as well. They have -- from FMCG side, they have with Amul. Pepsi had put their refrigerators in these small centers and increased their distribution. Then they are in talks with Britannia, they were in talks with Pidilite, et cetera. And other very interesting company was Whirlpool. Whirlpool, after talking to CSC, customized washing machines for rural areas. And lot of us who have traveled outside we find laundrettes there in Europe, U.S., et cetera. They actually had villages [Foreign Language] putting up laundrettes in their VLE centers. And where the villages -- where there were problems or they had smaller houses or they wanted to get the clothes washed, they experiment -- they are experimenting with these village level entrepreneurs. So opportunities have no end. I mean, in terms of -- if you start understanding what are the requirements in these areas and how you can fulfill them. We only still have 8% to 9% credit penetration in rural areas. But the interesting part is if you see between 2017 and 2021, the [ SURU ] credit share in the overall economy has increased from 17% to 21%, and that is indication that it is going to only increase further. And even if we talk about rural village level, entrepreneurs, et cetera, what will help in increasing credit is -- today, most of them are bank accounts. I mean, Jan Dhan and Aadhaar, today, easy to get a KYC. And if you have -- if you're using your bank account, today, most of the banks have developed capability based on analytics and other technology interventions to be able to give loans to people based on the bank statements and transactions happening. So opportunity is how much you want to [indiscernible] capture.

Sure. Just maybe 2 minutes on the physical part of the infrastructure. So we've obviously heard a lot in terms of how we're talking about rural roads, electricity to all, LPG connections, water, what's your experience been? And is it like different across India, some parts are better, some parts are not? Maybe just a -- maybe a couple of minutes on this, not...

So I personally see that road infrastructure has improved across the country. Well -- I mean, earlier, what would take few hours, because the roads are much better, you are able to travel with much more ease. We are seeing adoption of solar as far as electricity is concerned in many areas, many parts of the country. Water remains to be -- continues to remain an issue which all of us know. I mean, lot of us who stay in Bombay, in our buildings get tanker water. So the point is that water is a problem not only in rural but it is all across. But there is a lot happening on the infrastructure side. But the worst was, I would say, health care infrastructure. But I think due to COVID, that also is now seeing focused investment from government side because I personally believe that if health care infrastructure in rural and the education ecosystem focused investment comes, then development would be much, much better. But, yes, growth is happening. See, we are a complex country. Every state is a lighter country in itself. I don't want to talk more about what are the challenges and issues which all of us know. If we all see the bright side and believe that if right kind of interventions happen, we can really see growth in economy. I want to just quote one statistic that total deposit of banking system is [ 150 lakh crores ]. Now 60%, 70% is concentrated in 132 districts, and next 15% to 20% is in 109 districts. You just imagine, because of technology adoption, penetration of bank accounts, if we are able to double the credit in semi-urban and rural areas and also focus -- every company sees that how they can use technology to reach out in rural areas, create employment. Look at what can happen to the economy. And this also will get supported in future with account aggregator and [indiscernible] now getting live through RBI because our ability to give credit in rural areas will increase, and that certainly will help in development.

Right. Also, Smita, in terms of behavioral changes in rural India, right, so maybe I'll talk about a few things and ask you what your thought is. So obviously, we're seeing all these general accounts and a lot of -- clearly, you've seen bank accounts open up. But in terms of financialization in a full form, are you seeing -- so is this leading to understanding of savings products? Insurance, for example, are you seeing more people like looking at these things, what's your sense?

So the -- we are still highly underpenetrated country as far as insurance, credit or even mutual funds, et cetera, is concerned. But if you see last 2 years, and especially, I would say, last 8 or 9 months, we have seen increase because if you see the number of demat accounts, which have got opened a number of [ SIPs ] which have happened in the industry in -- so Sanjeev, can you just repeat what you had said?

So what I'm saying is in terms of insurance, in terms of other savings products, in terms of [indiscernible], are you seeing people getting more -- like wanting more of this? Or has the knowledge, awareness and even demand for this gone up?

Yes. So that is what I was saying that if you see, while we are underpenetrated, but last 1.5 years if you see the FinTechs, the banks, et cetera, who have been in this space, have seen rise. But we still have a very long way to go. The number of customers who are using whether it is insurance, mutual funds are much lower. Yes, because of Jan Dhan, the bank accounts penetration has happened in the country. But if you talk about credit and investment products, we still have a huge opportunity and long way to go. And that is why you see a lot of FinTechs who are getting into mass wealth management space. You are seeing a lot of FinTechs trying to give small credits because the very fact that 3.15 crore small retailers or traders are in semi-urban and rural areas. We have 11 crore farmers -- registered farmers in the country. And almost 85% of them are marginal farmers. But if somebody comes out with a product, how do you actually develop products for these marginal farmers, develop products of micro insurance and micro mutual funds, et cetera? Tremendous opportunity, and it is huge. And some of the FinTech players you are aware. They have -- if you take small case, it has the minimum size is around INR 100 or INR 500. Same thing in micro insurance. So if we develop products which will cater to these areas or to these segments, opportunity is really, really huge. Really huge.

Right. I'll come back to these fintechs. What about agrotech? Are you seeing -- are you -- we see -- obviously, we're here -- sitting here, we hear about these agrotech companies trying to get things like fertilizers or raw material, all that stuff for the farmers. What has been your experience? Is there excitement there or...

I'm very excited about this because some of the youngsters and what they are doing in this space and some of them we are actually partnering with, it's really good times ahead. Especially when we see the changes which government is bringing in terms of -- especially in agri space, and how now farmers will be able to sell their product directly to the consumer, actually gives a lot of opportunities. So in this space, I feel a lot of changes happening due to these agrotech, and they're solving problems of the farmers. So if you see a large -- and if you see how much investment has come in agritech companies because in last 2 years or so, if you see education companies have received a good -- quite a substantial investment, agritech companies have received quite -- I would say, it's substantial investment, which earlier was restricted to pure fintechs. So this is a sign of changes which are happening and people are seeing that there are opportunities here. And see, for me, they are solving problems. I know fintech -- agrotech, I would say, who had worked in America, who did -- sold his startup there, came back here, based out of Chandigarh. He is actually working with farmers in Kashmir, Meghal, Northeast and all parts of the country. Now if he is able to get apples directly or cherries directly from Kashmir, or even saffron, directly coming in and selling it to the consumer in Bombay or Delhi, the income anyway of the farmer will grow. And the point is that these are the changes which we are looking forward in our country. Now -- in this pandemic, I remember that there [Foreign Language], and pineapple was getting wasted because the crop and their logistics was becoming an issue, et cetera. They all figured out a way how to then bring it and sell directly to the customers in Bombay, Delhi, Bangalore, et cetera. So these agritech start-ups are bringing in innovations and solutions, which is going to help our agriculture ecosystem. So I'm personally very positive on that.

Sure. Also, one of the things that -- I was talking to ICICI Bank recently, and one of the things they were saying that this time around, the personal loans will actually be not so bad because of civil. But what are you seeing on civil on rural side? Is there more awareness of civil scores? Are people saying that, you know what I'm worried if my -- something goes wrong with [indiscernible] what is going on there on civil side?

So very interesting. In fact, CSC has tied up with TransUnion. And they are actually creating awareness about civil. And obviously, TransUnion is paying them for creating that, may be a very, very small amount. But the fact is that this awareness is getting created. People are understanding because see, in our country, there are pockets which are very, very prosperous on agri side, et cetera, but the default rates are high. If this kind of awareness gets created and lending is made available there, obviously, you will find more prosperity. So because of, again, data being available and people can actually see anything today on their phone, so awareness is there. And they are all realizing that if they want to grow and if they want to take loans, et cetera, they need to have a good credit score. Credit card, I mean, if you see today, we issue credit cards, a large number of credit cards we are issuing in semi-urban and rural areas. So there is -- now you will say where will he go and use? He's using up for online payments. Online payments because there may not be bus terminals in rural areas. But today, you can use them for online payments. So clearly, the awareness is increasing, and as more and more awareness increases, technology adoption happens, we will see a very different kind of growth happening.

So that's very interesting. So let's also talk a bit about farmer income, so because that's one of the reasons why, at least that's my view, that why our credit has been so low to that side is that incomes were very volatile. And then, hence, makes them very less creditworthy from a banking perspective. But are you saying that because of agrotech and because of, let's say, things like a CSC coming in, are rural incomes becoming less volatile? And hence, the ability to give credit becomes better?

So I would say we still have a long way to go. And why I say that is while the agrotech and agritech companies have come in, in the last few years, and they are helping people understand what kind of cropping pattern, what kind of interventions are required to grow their income, but it is a process right now. So for example, if you see North India was very strong in cereals, you know Punjab and Haryana, wheat and rice is predominant. But the fact is that the cash crops and many other crops which are there are now gaining popularity or are being grown more based on the awareness, which has been created. And a mix of cereals, cash crops, et cetera, has to be there to make sure that the income of a farmer increases. So the process or interventions have started. But have you seen substantial improvement? It's going to take time. And the fact that 85% of farmers in our country are marginal farmers, it's not easy to rotate the crops also. And no, it is -- I mean, they require a lot of understanding and awareness how to rotate the crops in that small holdings to increase the income. So I wouldn't say -- but I would say the positive part is that because of the awareness and I mean, today, net, cable, et cetera, now in everyone's home, at least people are aware. And because of this awareness, the things are changing. But have they adequately changed? No, we still have a long way to go.

Sure. So I'll come -- again, I'll come back to credit in a different way. But let's talk about other banking. So let's say deposit. So as you said, that the opportunity for raising deposits is pretty large. And as, let's say, a [ DBT ] is happening now, and also with general accounts in place, so -- and people doing more the UPIs payment, so everything is getting more formalized in many ways. So does that mean that the opportunity for deposits is actually probably the easiest to start with?

No. Both, I would say, deposits, investments and loans, all. Because see the point is that the cash which used to be there at home it needs to be brought in the mainstream. And for that, we -- in rural India, cash still is dominant. But yes, it is changing. If you see how the number of cash transactions are coming down. But if you say drastic change [Foreign Language]. But you would say substantially, you can see people having a mix of online payments as well as cash. And today, once they get used to the ease of online payments, they started using online modes much more. But -- the point is I would say that there are opportunities for all, it is for deposits, for investments and for loans because we are so highly underpenetrated that even if the penetration gets doubled, we still be in 20s or mid-20s.

Right. So let's talk a bit about the credit part of it. And if you see -- again, I'm talking about the whole financial system as a whole right now and not -- right? So given that what is happening -- earlier, at least the banks used to not give credit til they had proper income documents and that was always a challenge. But now with all these UPIs and at least people have bank accounts and people making these kind of payments, there is a history now of data -- at least there's a data of spending pattern and so. So are you able to use this data to give credit now rather than just their income document because income document may still not be there, right?

Very good question, Sanjeev, See, there are 2 parts to it. If I have an existing customer who's banking with me, very easy using data analytics, technology, et cetera, to extend loan to him. What is very important for me is to get new customers because then only the growth happens. Now that is where I was mentioning about [indiscernible] and account aggregator. Now open architecture framework for credit will open tremendous opportunities. So what is going to happen there is that if I'm a customer of x bank, and today, y bank approaches me or y bank gives me a better offer, today, with my consent, I can actually give my consent to share my bank documents or bank account statement, based on which the y bank can give me a loan. So the point I'm making is that it is democratization of credit where the customer has the power to decide how he wants to use this data rather than what earlier the financial institutions, et cetera, had it. So today, I can give consent to any bank who becomes later alive on account aggregator and [indiscernible] and any institution which gets registered as -- or certified as FIP and FIU, which is financial information provider and financial information user, this is going to be a defining -- because when RBI governor had launched account aggregator, people talked about this being UPI of credit. And as this gets popular, the ability to give loans without a bank statement -- because today -- without sorry, income documents, because today, everybody has a bank account. Everybody is there on social media. And you will be surprised that people from rural areas use WhatsApp, use Twitter much more than many -- much more than metro and urban. You see whether in past, TikTok [Foreign Language], or any other YouTube [Foreign Language], you can see that. So basically, combination of financial data and the data which is there on social media, et cetera, empowers or enables the bank to use that data and extend credit, and this is going to get improved once everybody gets on to account aggregator and account -- sorry, on account aggregator network. So future, you may not -- they may be integrated with traces. They maybe get integrated with GST. They may get integrated with other, I mean, entities, which will provide data. And based on customer consent, the loan provider can access the data with proper data security and give it to the customers. So this is a very interesting development. And going forward, I personally believe it will become a kind of UPI for credit.

Right. So if you look at all these developments, especially with technology and so on, and then, of course, you'll have fintechs and I'll come to fintechs in a minute, but so from a bank's perspective, what do you think is required -- like -- so obviously, not all banks will be able to gain out of this, that's what it looks like. Or do you think that all banks are in a good position to gain out of this or some banks will be able to gain higher depending on what -- and what resources do you need for that?

So honestly, when UPI was launched, the banks took their time to get onto this -- or adopt UPI. And that is why you saw PhonePe and all becoming a dominant player in payments time. But as far as account aggregator and [indiscernible] is concerned, 8 banks have already gone live when announcement was done by the Deputy Governor RBI. So I mean, it is something, if we have to, in future, be able to scale up credit and make it seamless because when I talk about payments in UPI, I mean, it's 1 click that you are able to do it. Same thing if you are able to do in -- as credit is concerned, I mean you don't have to -- have a choice, you will have to come today. Everybody has had to come on UPI. So adoption of technology to make things simpler has to happen because today's customer is not going to wait. If he does not have convenience and right kind of product, there will be many more who will give. So that's why, as far as I'm concerned, this is something which is here to stay. And whoever adopts, irrespective whether it is banks, NBFCs, et cetera, whoever adopts fast will gain more.

Right. So let's come to NBFCs and fintechs. And in the past also, you had NBFCs [Foreign Language] like a Shriram Transport or who had that last mile and what used to happen was that Shriram Transport would give that secondhand truck via loan, banks who didn't want to, but then banks would give a loan to Shriram Transport, right? Do you think is there a partnership model continues with the bank, the fintechs and NBFCs or you think that some of these fintechs will actually take away or they are more a competitor? How do you see them?

I don't consider them ever as competitors. We will all coexist. India [Foreign Language]. And also we are -- as when you were talking about Shriram's example, we would like to give to Shriram also, and we would like to give the -- we now have capability to give for the loan to the end consumer as well. So that is over the period -- earlier, we would want to give only Shriram. But today, when I have data of the last mile user, why I shouldn't be able to give it to him as well? So clearly, we -- all of us are working on and developing capabilities that we should be able to service all kinds of customers. And which is aided by analytics, technology and other interventions, which are now there to make credit much more easier. And this is when, I mean, you do not dilute your underwriting standards even one bit, even one bit.

Right. So let's talk a bit about HDFC, your strategy in this. And I'm just taking an example. And we were talking -- we had a fireside chat recently with a company called Home First. And they are using technology, again, to do -- AI and technology to, again, find the creditworthiness of an individual, right? And -- so would you give a housing loan also to some of these -- to rural India the way Home First is giving, or what's your strategy in that?

So we already do it. As I said, we have 52% branches in rural and semi-urban areas. And today, all our branches give all the products, [Foreign Language] whether it is housing loan, whether it is 2-wheelers, whether it is auto loan, whether it is consumer durable loan, everything. So as far as we are concerned, we have been giving, through our rural branches, loans forever. And housing loan is one of the biggest, I mean, portfolio we have. And affordable housing as well as -- even our CSEs do housing loan. I mean they generate the leads and obviously, our documentation is required so fulfillment happens. So as far as we are concerned, with almost 6,000 branches and 15,000, 16,000 banking correspondents and equal number as our banking facilitators we are spread out and doing all [ asset ] products. And today, we do consumer durables from where a VLE can actually, based on data, can give a sanction letter to the customer and within 50 kilometers to 100-kilometer radius of his center where HDFC bank's approved store is there. You can go in and take a disbursement, buy a television, buy a refrigerator, et cetera. So as far as we are concerned, we are already there.

Right. But -- so how do you -- again, taking example of Home First, and they say that a lot of documentation is not available, so they end up doing video, KYCs, and trying to find out whether the person is actually creditworthy or not. Would you -- so look, what I'm trying to understand is would you actually give short-term loans to people, more consumer durable than big ticket items, or is there a difference in that thought process?

So let me tell you, based on the RBI data which got published, right now, the requirement, which is seen in rural areas is more for a 2-wheeler, personal loan, consumer durables, et cetera, because whatever happened during pandemic days -- and yes, there is for affordable housing also. So if you have right documents, I don't think so there is -- and I'll just give you an example of one of the states. They are giving -- putting up a whole drive, and this is a -- comes under government reforms, to give the right ownership documents to the people who give the proof, et cetera. So there is a lot of reforms which are happening on the land ownership, et cetera. But as I said, we are present in wherever we are present. We have capability of working with the customer, finding out about his - about the details because if you go to tehsildar's office, panchayat's office, land documents can be validated. Today, everybody has a Aadhaar card. And if somebody is buying a house, we expect him to have a PAN card as well. So because of our coverage and sheer distribution, for us to give loans is not so difficult and validating. Video KYC -- in fact, today we do video KYC only for people who are doing -- opening a instant account with us. So we have an online account opening. Once the customer fills in, digitally, the account opening details and then he send the video link where the -- our bank resource does his video KYC -- so all whether it is assets or liabilities, it's already happening. So as far as we are concerned, I mean, this is now a normal business-as-usual process for us.

Right. So would you say that HDFC Bank is now completely geared? Because you already have a lot of branches. As you said, you have all these banking correspondents and you're working with CSCs now. You had an early mover advantage also. Now some of the other banks may have joined, but you had -- so given all this, you all are in a far better position than many other banks to actually take -- make use of this whole rural opportunity that is coming in. Would you say that?

Absolutely, we are very focused. And as I said, whether it is MSME, whether it is traders, whether it is -- because if you see rural, only 40% comes from agri. Then there is manufacturing services, allied opportunities which are there. And we have -- we are properly in a systematic manner, focused manner, working on all this. And clearly, the opportunity is huge. And as I told you, we were one of the first banks to go live on account aggregator. We have built up our distribution in rural areas. And we have actually sold 1.5 million products already through CSC. So we are very clear that we have developed capabilities to serve rural India, and we are continuously reengineering also our products and customizing them so that we meet their changing requirements. Because today, the customer awareness is much more than what it was 5 years back. Today, they understand the products. They would -- as I was giving you example [Foreign Language] they are buying laptops, they are buying -- and if you see some of the statistics, the developed rural is buying luxury products as well. So as the awareness increases, as disposable income increases, it's going to -- and a large part of employed people in semi-urban and rural are government employees. Today a teacher earning INR 50,000 in Bombay or Delhi and teacher earning INR 50,000 in Maroli village obviously has more disposable income. So their ability to buy products or take loans is comparatively higher, in fact.

Right. So would you need more branches or you have enough branches? You think now you can do most of it given what is happening...

Sanjeev, it has to be a combination of both, India is still huge. And when you deal with money most of us like to see the face in the sense that we should know where our money is. So it has to be a combination of branches, banking correspondents and our digital strategy to reach out to the customers and get more and more customers. You can't depend on one itself, it has to be a combination of all 3 because if we have to reach out to the large set of customers in all geographies, we have to have a combination of all 3.

Right. But -- and you mentioned early on that the breakeven for a branch was -- rural ranch was almost like just a year. Would you say that, that has changed or that's actually getting better or...

No. See, it depends. One has to clearly have a focused strategy that how do you want to go. So for example, today, 60,000 villages in the country you can say, has developed rural. And close to 130,000, you can say emerging rural. Now you need to focus on emerging rural because developed rural, everybody will be there. But if you focus on emerging rural, you will be able to grow. And that's how you have to chart out your path that how is India growing, where can you contribute more and where can be a win-win situation for both.

Right. A fair point. So would you -- would it be fair to say that if I look at growth, overall system growth, rural growth both in credit and even in deposits, maybe, but maybe credit, will be faster than the system growth? And would that be same for you guys as well?

So I just told you that how the rural market share in the credit has increased. So while the quantum value will still be higher in metro and urban, but the percentage growth will be much higher in semi-urban and rural because you are getting into new markets and you will be -- so unit wise, we might be able to do more. But obviously, total value, quantum, et cetera, metro and urban still would be more. The overall share of credit in rural has increased from '17 to '21, but '21 to '25 will be much shorter period to go.

Right. Sure. Smita, so one last question from me. And this has actually come from someone who's participating. And this is slightly more shorter-term question, which is given that we have seen a much sharper second wave, what do you think -- what's your sense of income levels plus -- of people, have they got impacted quite a little bit, and hence, does it mean that higher NPAs in the system? And even in micro -- especially in microfinance also, any color on that?

So I would say, Sanjeev, all of us know we are living in really unpredictable times. Everybody keeps saying, first and second wave all of us have witnessed. Third wave, all of us are confused because people are saying it is going to come and people are saying, okay, 80 crore people have got vaccinated. So there are mixed -- this thing. We really don't know what's going to happen. If you ask me, if there has been an impact, yes, there has been impact. There has been -- unemployment has increased. The maximum -- a large impact has also been on the education sector when you have around 75% to 80% schools and 60% colleges in semi-urban rural. They don't have online capable -- the students don't have online capability. And the teachers did not have the capability of teaching online. Then similarly, the small traders if -- who are dependent on many things -- for example, a large number of our states are dependent on travel and tourism, and which all of us know is struggling. So there is -- the issues are definitely there. But the positive part is that we Indians are known to be -- have really resilient and come back with a [indiscernible]. So that is what one is seeing that, yes, there is positivity, there is development happening. But I know very well that it's not easy everywhere. Some of the sectors have got impacted. As far as -- I will only talk about our bank, I think we are in line. We don't foresee too much. And I think maybe Ajit will be able to give a better answer on that as far as NPAs, et cetera, is concerned. But till now, I think the results are there in public domain. HDFC Bank has been able to manage very well.

Right. Fair point. I think -- Smita, that was very, very useful and very helpful. And I think your positivity is quite infectious, I must say. I think -- I hope that this whole rural transformation, the way it's looking, it's looking very, very interesting. And I'm sure we'll have more discussions as you go with this journey of yours. So -- and all the very best, Smita. Thank you so much.

Many, many thanks, Sanjeev, for having me here. It was a pleasure talking to you.

All right. Bye.