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Opinion
Andy Mukherjee

India's Banking Revolution Has Started Without the Banks

Traditional financial organizations are falling down on the job while fintech is efficient but hemmed in by old rules.

Start the revolution without me: A branch of HDFC Bank in Maharashtra, India.

Start the revolution without me: A branch of HDFC Bank in Maharashtra, India.

Photographer: Dhiraj Singh/Bloomberg

No deposit-taking institution in the world is trusted more by savers and enjoys bigger cachet with investors than HDFC Bank Ltd. What this plenitude has done to India’s most valuable lender is make it so lethargic — literally, with its digital services suffering repeated tech outages — that it had to be banned from issuing new credit cards for eight months. But a regulatory slap on the wrist is no durable solution. Bank licenses are permits to make money out of thin air. The prospect of sharing the privilege with a new breed of digital rivals will be more effective at keeping HDFC Bank and other traditional financiers on their toes.

On valuation metrics, HDFC Bank’s price-to-book multiple of four is way ahead of much bigger lenders in China, the U.S., Japan, Australia,  Europe, Singapore and Hong Kong. Some Indonesian, Middle Eastern and South Korean peers, and even a couple of Indian rivals including the Mumbai-based Kotak Mahindra Bank Ltd., are more expensive on a per-share basis, but none can boast HDFC Bank’s $189 billion deposit base.