Jefferies Asia Forum: HDFC Bank, IDFC First Bank, Paytm, and others share growth strategies

The Jefferies Asia Forum provided valuable insights into the financial sector, featuring discussions with six financial institutions, including banks, life insurers, fintech, and stock exchanges.

HDFC Bank remained optimistic about deposit growth, loan expansion, and asset quality. IDFC First Bank acknowledged near-term pressures in the microfinance segment but highlighted strength in other areas. Life insurers HDFC Life and ICICI Prudential Life awaited regulatory clarity on distribution norms while exploring strategies to mitigate potential impacts. Paytm expressed confidence in its merchant business and an improving outlook on retail lending. Meanwhile, BSE assessed the implications of open interest (OI) limits and ruled out any immediate changes to its derivatives expiry schedule.

HDFC Bank: Strong Deposit Growth and Loan Expansion

HDFC Bank expects a 15 percent deposit growth next year, outpacing the sector’s 11 percent. This expansion, driven by new branches and maturing ones, is set to boost credit growth, aligning with the sector average in FY26 and surpassing it in FY27. The bank has cut its loan-to-deposit ratio (LDR) by 12 percentage points over the past year to 98 percent and anticipates slower LDR moderation ahead.

Despite rising competition in housing finance from public sector banks offering lower rates, HDFC Bank remains confident in its secured and unsecured personal loan growth. The HDFC Ltd merger has enhanced cross-selling of banking products to mortgage customers, boosting profitability. Regulatory support and lower cost-income ratios, driven by branch expansion, are expected to further strengthen its financial position.

IDFC First Bank: Navigating Microfinance Challenges

IDFC First Bank acknowledged challenges in microfinance due to regulatory tightening in Karnataka, which hit collection efficiency in January and February. However, March showed signs of recovery, stabilizing overdue loan ratios. Elevated Q4 FY25 credit costs, mainly from microfinance losses, are expected to peak this cycle but ease thereafter. The bank plans to reduce its 5 percent microfinance exposure, which may pressure margins, fees, and priority sector lending compliance but enhance long-term stability. Outside microfinance, IDFC First Bank continues to see strong asset quality and growth. Deposit mobilization remains healthy, though rates may moderate from April.

Life Insurers: Regulatory Clarity and Business Adaptation

HDFC Life and ICICI Prudential Life discussed potential regulatory changes in bancassurance norms, expecting a decision in the coming months. If implemented, the industry may get a two- to three-year transition period to comply with business limits. Extending the free-look period from 30 days to one year is expected to have a limited impact, as insurers can claw back commissions on surrendered policies. The open architecture framework for insurance agencies remains under review, with implementation challenges.

HDFC Life is well-positioned to manage surrender charges, with only a marginal 30 basis points impact on margins. Competitive intensity has eased as mid-sized insurers adopt more reasonable pricing. The industry is expected to see 12-15 percent premium growth, with HDFC Life aiming to outperform.

ICICI Prudential Life reported a slowdown in ULIP sales, which may affect near-term operational efficiencies. It expects minimal impact from bancassurance caps and is confident in managing free-look period changes. While credit protection volumes remain weak in microfinance, other segments continue to grow steadily. Competitive pressures have slightly eased, stabilizing pricing strategies.

Paytm: Strength in Merchant Business and Prospects in Retail Lending

Paytm highlighted the success of its merchant business in payments and lending, boosting overall profitability. Retail lending volumes have declined, with Paytm mainly acting as a distributor of personal loans, reducing its role in collections. The potential introduction of a merchant discount rate (MDR) on UPI payments by the government is a key factor to watch.

Paytm is also expanding into wealth management, focusing on mutual fund distribution and broking to strengthen client engagement. While lenders maintain strict credit filters, retail lending volumes could pick up in the coming quarters. Personal loans and credit card activity is expected to remain stable in the near term, with gradual improvement over time.

BSE: Evaluating Market Dynamics and Growth Strategies

BSE is assessing the impact of the proposed OI limits and believes it would be prudent to monitor market responses before implementing any changes. The recent shift in the F&O expiry date by NSE to Monday, from Tuesday for BSE, could influence market share and trading volumes, but BSE currently has no plans to alter its own expiry schedule. Management is focused on enhancing liquidity for its monthly options contracts and is actively engaging with global banks to drive participation in this segment.

Additionally, the co-location business presents significant growth potential, with the installation of new racks and operational efficiencies improving the exchange’s competitiveness.

Overall, the Jefferies Asia Forum highlighted optimism among key financial institutions despite regulatory uncertainties. HDFC Bank and IDFC First Bank focus on deposit growth and asset quality, while life insurers brace for potential regulatory changes. Paytm’s merchant business thrives, with cautious optimism for retail lending. BSE continues to enhance liquidity and technology. These institutions are positioning for sustainable growth by leveraging regulatory support and market opportunities.

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