HDFC Bank’s decision to allocate approximately Rs 1,500 crore as ex-gratia payment to its staff stands as a remarkable gesture of appreciation following its impressive Q4FY24 performance. The move, spearheaded by Sashidhar Jagdishan, the managing director & chief executive, aims to acknowledge the dedication of employees during the merger with HDFC Ltd and to address attrition within the organization.
The bank’s earnings announcement for January-March showcased a robust 37.1 per cent growth in net profit, fueled by a one-time gain from selling a majority stake in HDFC Credila. Simultaneously, the bank made floating provisions totaling Rs 10,900 crore, neutralizing the impact of the stake sale gain.
Jagdishan highlighted the significant efforts exerted by the team amid the merger and subsequent adjustments to a larger balance sheet and adverse liquidity conditions. He emphasized the importance of motivating the ground workforce, which constitutes 90 per cent of the bank’s total manpower, particularly in the face of heightened attrition.
Addressing concerns about the sustainability of such expenses, Jagdishan clarified that the ex-gratia payment is a one-time occurrence, leveraging the one-off gain from the stake sale as a means to motivate the young workforce.
Q4 Turnaround
In response to previous criticisms regarding deposit mobilization, HDFC Bank demonstrated a substantial improvement in the fourth quarter, mobilizing Rs 1.66 trillion in deposits, with retail deposits reaching Rs 1.29 trillion. This achievement has contributed to the bank gaining market share in deposits.
Jagdishan acknowledged the feedback received after the third-quarter earnings call and highlighted the incorporation of many suggestions into the bank’s operations. He attributed the higher deposit flows in the January-March period partly to transitory and unexpected factors but emphasized the healthy growth in retail deposits.
Despite the impressive Q4 performance, Jagdishan emphasized the need for sustained momentum, emphasizing enhanced customer engagement and a service-first culture as crucial factors.
Liquidity Improvements
The fourth-quarter deposit mobilization allowed HDFC Bank to lower its credit-to-deposit ratio to around 105 per cent and liquidity coverage ratio to 115 per cent by March-end, both improvements from December’s figures.
However, Jagdishan noted the challenges in meeting priority sector targets, particularly in sub-targets like small and marginal farmers and economically weaker sections. He hinted at exploring inorganic opportunities to meet these targets, underscoring the bank’s commitment to fulfilling its obligations.
In summary, HDFC Bank’s substantial ex-gratia payment to its employees reflects its commitment to recognizing and rewarding their efforts, following a strong performance in Q4FY24. The bank’s focus on deposit mobilization and customer service underscores its dedication to sustaining growth and enhancing stakeholder value.
