Everyone must be aware of the current scenarios in the Indian economy. Like every other international economy, India has also been hit by the pandemic, contributing to drastic economic changes. As a result, most business organizations and industries are experiencing high competition in every sector. Although competition is an excellent opportunity for an organization, it also comes with many risks. Financial institutions of India are one such victim, which has forced most companies to revise their business strategies that have been carried out for years.
HDFC is a private Financial or Banking institution that was established in 1994 in the city of Mumbai, India. The 24 years of its existence in the market have enabled the HDFC banks to look into multiple opportunities that have been a major reason for its domination in the Indian economy. This banking institution is known for providing different types of Financial facilities, from personal banking to the process of lending.
In the recent issue of the bank’s Q1 report, it was observed that the overall net profit till June 2022 stood at Rs. 9,579.11 crores, with an increase of 20.91% from the previous Financial record. However, in the context of loan-related profit, HDFC witnessed a loss of 15.7% in corporate and wholesale money lending, with an increase of 21.7% in retail loans and a 28.9% hike in rural banking loans of the company. The high-interest rate, and the wholesale and corporate loans led to a huge loss of Rs. 50,000 crores.
Currently, the lowest interest rate in corporate and wholesale loans stands at 9.45% provided by the DCB bank, followed by Dhan Laxmi Bank, Providing a corporate loan at an interest of 10.50%. In comparison to these two banking institutions, HDFC bank is currently availing corporate loans at a high-interest rate of 11.90% since March 2022. Hence, such high interest has scared away people and corporate entities from seeking financial aid from the HDFC and consider banks having lower interest.
The main reason for this economic scenario is the growing competition rate among the Financial industries. The inflation rate in India stands at 7%, which is higher than a few years back. A high inflation rate takes away the ability of the consumers within the economy to choose options that would cost more. As a result of the change in consumer behavior, most of the corporate and wholesale industries are witnessing a loss in the economy. Hence, to aid them during such a challenging economic scenario, these corporate and wholesale industries consider seeking Financial aid from banks offering low-interest rates to cut off the Financial burden of liability.
The loss of Rs. 50,000 crores in the corporate and wholesale lending sector for HDFC has been a victim of this growing competition that is indirectly due to the drastic transformation in the country’s economy from the inflation rate to the consumer behavior or purchasing habits.