Chapter 2A: First and foremost, it is important to note that there is no immediate threat to the safety or liquidity of HDFC … other than from cyber attacks. Or from a meltdown in high value properties. And of course, all bets are off in the event of war. But that is force majeure.
AND there is one big unknown. It is the combined impact of ai, crypto and cyber. This is a Tsunami like no other. And it is thus prudent in the medium term to stick to nationalised banks – who inspite of all their ills present a far more stable long term outlook.
HDFC Bank was never set up to lend money. It was set up to collect money. It is the google maps model. If you deposit Rs 100 in the bank at 3% yield, they will lend you the money back at 15%. If you have to take a credit card, then the interest will be 60% pa.
If an Uber driver were to approach the bank, he is unlikely to get a loan. This, inspite of the govt guaranteeing the loan. Inspite of the driver having a viable business case. Inspite of a car looking after livelihood of two families (10 individuals)
But if a salaried HNI were to seek loans for a Rs 100,000 per sqft apartment in Gurgaon or an overpriced fossil fuel luxury car which is the third car in a family of two – they will gladly fund it.
Deposit taking did not stop at the Bank. The insurance arm replicated the same model. Using SIPs tens of thousands of crores were also collected in the insurance arm.
In a capital starved economy, he who has the capital is King. And he who gives that capital to such an entity – no longer has it. Fixed Deposits are a fairly unique savings proposition in India. People place FDs because they believe that they are safe. And that safety shield goes beyond the written word. Literally no one has ever lost his savings in a bank going bad. Even Rupee Bank in Pune or PMC in Bombay – depositors by and large got their money back. And it is this safety perception that new private banks like HDFC ride on.
So what is it that made HDFC race ahead of everyone else. Was the Bank promoted by a set of genius’s. Let’s look at the facts. The supposed promoter was HDFC. Not one senior person from HDFC was allowed into the Bank. The founder CEO was from Citibank Malaysia. Pretty much everyone else came from Citibank.
Citibank used to run on a computer called Prime Computers and a proprietary OS called PrimeOS. Unfortunately Prime went bust and ended up as a division of a company called PrimeTel which had the source code. But then it emerged so did others.
As a result in 1994, CitiBank became the victim of a massive cyberattack.
From a computer terminal in his apartment in St. Petersburg, Russia, Russian software engineer Vladimir Levin broke into a Citibank computer system in New York and, with support from several accomplices, stole $10.7 million by transferring the funds to accounts around the world.
And this is when I got to peep deep inside the internal operations of the Bank
