Why HDFC Bank denied loans to Vijay Mallya

Noted banker Aditya Puri has advised his peers to clearly separate personal friendships from banking and cited how his bank turned down a loan request from the now-fugitive businessman Vijay Mallya.

Explaining how HDFC Bank had refused loans to the ex-liquor baron Mallya, Puri said, "a banker can have a coffee with any person and then do what he wants," stressing that it was his long time colleague Paresh Sukthankar who actually declined the loan to Mallya.

"If you are a bad risk, you are a bad risk. You can be my good friend, I can give you coffee and send you away. Just for your information, they (Mallya's officials) came to me for a loan and I gave them coffee and told them that I will consider the loan. And then Paresh turned it down," the HDFC Bank chief said, at a function of launching a book on the bank by journalist-writer Tamal Bandopadyay here this evening.

Every time the call came, Mallya used to abuse and his blood pressure would go up. So, friendship and banking are not co-related, he stressed.

Such clear thinking about lending and risk management has never disappointed the lender, whose stock command one the highest premia across global banks and has been known for having one of the lowest NPA ratios in the industry and consistently clocking over 20 percent profit growth in the past 10 years and more.

For March 2019 quarter, the bank reported a 23 percent spike net income, while its gross NPAs came down to a paltry 1.36 percent, while the industry average is close 10 percent.

Launching the book--HDFC Bank 2.0--which speaks how the largest private sector lender embraced digital changes, State Bank chairman Rajnish Kumar said opening of the banking sector after the 1991 reforms to the private sector was a "defining moment" which changed the entire landscape.

On the decision of the bankers led by SBI to send Jet Airways for bankruptcy, he said the airline company in "more able hands" of the resolution professionals now.

"We have left Jet in more able hands than us, which is the resolution professional," Kumar said. He also said banking is undergoing a "transformational change" and urged lenders to play the game without getting unnerved.

In an apparent reference to ongoing issues, he said banks will have to undergo the pan for a cleaner and efficient system which will help in the future.

Speaking on the bonhomie between bankers, Kumar said he had his rival Uday Kotak address SBI's top management last year and also the head of HDFC Bank's data analytics.

In a barb aimed at payment companies, he wondered how valuations of companies are going up with the surge in losses.

Puri said HDFC Bank is done 90 percent with its aim to be a lifestyle bank and in the next three months, certain clunky things will be done away with.

He also said there is no need for a fully digital bank, stressing that someone may be willing to go in physically as well, to which the SBI head chipped in saying a bank's physical presence is the strength on which digital products can grow.