How India’s fast-growing middle class propelled HDFC Bank into the Global 500

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How India’s fast-growing middle class propelled HDFC Bank into the Global 500

By Nicholas Gordon  | Fortune Magazine | August-September 2024 Issue

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The poster child for India’s liberalized banking sector is joining the ranks of the world’s largest companies. Mumbai-based HDFC Bank is fresh off last year’s $40 billion merger with its parent company—a somewhat risky move, but one that reflects the bank’s confidence in the continued strength of the Indian consumer class that fueled the rise of both companies. 

The bank debuts on the Fortune Global 500 at No. 306, with $49.3 billion in revenue for the 2023 fiscal year, almost double the figure for the previous year. It’s the only wholly private bank from India on this year’s ranking; State Bank of India, owned by the country’s finance ministry, is at No. 178. 

When India started to liberalize its financial sector in 1991, HDFC was one of the first to apply for a new license. A sterling reputation gave it leverage in talks with India’s central bank:  regulators let HDFC set up the head office of its new bank in Mumbai, the country’s financial center, despite rules requiring geographic diversity for “new age” banks. That created two separate, yet intertwined, financial giants: HDFC, which grew to be India’s largest mortgage lender, and HDFC Bank, which offered checking and savings accounts and all the other elements of consumer banking.

HDFC Bank has 93 million customers, more people than the entire population of Germany. With almost 8,800 branches, it has a larger physical footprint than Bank of America’s and Wells Fargo’s U.S. networks combined (albeit with only 17% of their combined revenue). HDFC Bank is also India’s largest bank by market capitalization, at $145 billion in mid-July. 

Its size is, in part, the fruit of staying focused. As other banks chased trends like lending to infrastructure projects or telcos—and got stuck with bad loans—HDFC Bank focused on providing retail financial products to an army of consumers, building a reputation for credibility and consistency in India’s sometimes rough-and-tumble banking world.  “The public sector banks had the customers and the deposits, but they didn’t have great products,” Param Subramanian, an analyst at Nomura, recalls. Under Aditya Puri (HDFC Bank’s first chief executive), HDFC Bank pioneered products like personal loans and credit cards for India’s consumers. 

That conservative approach has served the company for 30 years, growing it from a tiny bank with $38.6 million in revenue for 1995 into the conglomerate it is today. And now the bank is even bigger. Last July, HDFC Bank, now led by CEO Sashidhar Jagdishan, completed its merger with HDFC, its parent company.  The $40 billion deal was the largest merger in India’s corporate history. 

3 key takeaways from the article

1. The poster child for India’s liberalized banking sector is joining the ranks of the world’s largest companies. Mumbai-based HDFC Bank is fresh off last year’s $40 billion merger with its parent company—a somewhat risky move, but one that reflects the bank’s confidence in the continued strength of the Indian consumer class that fueled the rise of both companies. 
2. HDFC Bank has 93 million customers, more people than the entire population of Germany. With almost 8,800 branches, it has a larger physical footprint than Bank of America’s and Wells Fargo’s U.S. networks combined (albeit with only 17% of their combined revenue). HDFC Bank is also India’s largest bank by market capitalization, at $145 billion in mid-July. 
3. Its size is, in part, the fruit of staying focused. As other banks chased trends like lending to infrastructure projects or telcos—and got stuck with bad loans—HDFC Bank focused on providing retail financial products to an army of consumers, building a reputation for credibility and consistency in India’s sometimes rough-and-tumble banking world. 

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Topics:  Strategy, Business Model, Banking, Consumer Financial Products