At the end of the month when we get our salary, a small amount is spent on household expense. But a significant amount is left with us. What should we do with it? Put it in a bank? Or put it in on a bank? You must be wondering why I said the same thing twice! But these two have very different meanings. When I said put your money in a bank, I meant depositing it in a savings account or FD. The second way to use our savings is to invest it on the banks in other words, buy shares. Friends, I, Jagdeep Singh welcome you to Groww channel. As I have mentioned, if you deposit in savings account or FD, you get upto 6 or 7% returns. But, if you buy shares of the same bank, you may possibly get more than 20 or 25% annually. So, today we are going to talk about such a bank called HDFC Bank. In this video, we will talk about the history of HDFC, HDFC’s business, and HDFC’s financials. And at the end of the video, I’ll tell you some important points that will help you to make wise investment decisions. As we all know, the most important phase of India’s development started after 1991’s liberalization. Similarly, HDFC Bank’s history also starts after liberalization of 1991. In 1994, HDFC bank got incorporated. It’s first office in Worli was inaugurated by then finance minister Dr. Manmohan Singh himself. For any successful bank or organisation, it is very important that it has a good CEO. Which happened for HDFC Bank. Mr. Aditya Puri was made CEO of HDFC bank. in September 1994, From the beginning itself, he ran the bank very well. Under his leadership, HDFC bank did not just expand in different segments, but also made several acquisitions. HDFC bank made its first acquisition in February 2000 when they acquired Times Bank. Later, in 2008, HDFC bank acquired Centurion Bank of Punjab. It was the biggest merger of the time in India’s finance sector. Friends, to understand HDFC’s business, we will have a discussion around two points. First point is innovation. Second point: Conservative Expansion Approach. In terms of innovation then HDFC has always stayed ahead, in order to meet the requirements of customers For example, During late 1990s, Companies used pay salary to its employees in the form of cheque So employees had to submit the cheques in banks it had to be approved and then they would get their money. So HDFC bank, for the first time came up with employee banking through which a company could credit money to its employees’ accounts. For this, the employees had to open bank accounts in HDFC bank which helped HDFC bank expand. Second point: during the mobile phone boom in India, everyone started shifting to mobile phones. HDFC bank changed itself accordingly And it was the first to indroduce mobile banking in India. So HDFC brought mobile banking to India. In addition to this, the biggest example of how serious HDFC bank is about innovation was given in 2014, when their CEO, Mr. Aditya Puri, went to Silicon Valley and met with fintech Companies. Even then the CEO of HDFC bank was serious about getting to know That fintech would expand, the bank would have to change according to its customers’ needs so he took the effort to understand fintech. Let’s talk about the second point: Conservative Expansion Approach. You might know how banks work. Some people deposit money in the bank and the bank lends that money. Banks make more profit when they have to pay less interest to the depositors than what the borrower pays them as interest. So friends, the banks get more returns when they invest in risky assets. A lot of banks fail because when they expand they loan money to risky companies. Whenever HDFC loaned money to companies, they made sure the asset quality was good, They never compromise on asset quality. Now we will talk about Finances of HDFC bank. First of all, CASA ratio. What is CASA ratio? It is short for Current Account Savings Account. So, this ratio is very important to know at what rate the bank receives the money that it gets. If the CASA ratio is high, it means that the bank receives more money in savings and current account which could be loaned at higher interest rates to other parties. That way they earn higher profits. To talk about data, then HDFC bank has always kept its CASA ratio higher than 40%. So the borrowing cost is way less for them when compared to other banks. A trend that we see in the last quarter is that the CASA ratio of some banks have gone lower than 5 or 6%. That is because instead putting money in bank account people have started investing money in different place because they would get more returns that way. As you can see on the screen, in June quarter, CASA ratio of Axis bank went down from 47% to 41% and that of Yes bank went down from 35% to 30% and for HDFC bank, it went down from 42% to 40%. The difference is just 2%. There is an exception here, and that is Kotak Mahindra bank whose CASA ratio increased from 50.3% to 50.7%. Now let’s talk about the second parameter which is NIM As I already told you in the last video, if the bank gives 4% interest to its depositors, and it loans money to someone at 8%, the difference of 4% is its NIM. The higher the NIM, the better off banks are. Let’s compare HDFC bank’s NIM to NIMs of other banks. As you can see, HDFC bank’s NIM is 3.87 which is far better than other banks such as 2.40 of SBI, 2.71 of Axis Bank and 2.57 of Yes bank. Now let’s talk about NPA. If the bank loans money, but it doesn’t get back the money then it becomes NPA. A high NPA is bad for banks, because they will have to report as much loss. As you can see on the screen, if I talk about NPAs of other banks Yes bank’s NPA is 2.91%, 2.04% for Axis bank 1.77% for ICICI When I look at HDFC bank’s NPA, HDFC bank’s NPA is less than 1%, 0.43% to be precise. It is very less in comparison to other banks, which is very good for HDFC bank. Let’s discuss a few points that we can learn from HDFC bank. So we can keep those facts in mind when we invest, see whether the company we have invested is good or bad. First of all, management. Management is most important for a company. It is the driver, so to speak, which could drive the company in the right way or even the wrong way. In the case of HDFC bank, for example, the management was really good, they managed their expansion well. They diversified after thorough research into different segments. Second important point is core values. Every company has its own core values, based on which it expands itself. When you are thinking about investing in a bank or any kind of financial institution, analyze whether it is expanding, but not investing in too risky assets. Third point: innovation. A company should innovate in accordance with the requirements of its customers. If you invest in a company, check whether the end product is getting modified and updated from time to time. Because there are companies which were big, but did not innovate, and therefore closed down. For example, Kodak Cameras, and Nokia. So at the end, let me take us back to the beginning. What have you decided after watching this video? Are you going to put money in a bank or on a bank? You can let us know in comments below, also let us know what stocks you think we should cover in the upcoming videos. We will make a video on the topic that gets most likes in the comments. So friends, if you enjoyed this video, please like it. Your likes give us inspiration to make more videos for your information. Subscribe to our channel for new, upcoming videos.