HDFC Ltd, India's largest home loan provider, and the key promoter of HDFC Bank, has

done something to counter SBI, but it might prove to be too little, too late. The dual rate
home loan scheme comes with a fixed rate of 8.25 per cent till March 31, 2012 for a 20
year loan of 30 lakh for new customers who apply till January 31. Though 0.25% above
SBI's during the first year, the scheme is comparable to SBI's when taking into account
the first three years. But it is still inferior in its 0.5% processing fee against SBI's nil
charges.

HDFC Bank always had to be content with the No.3 position, behind SBI and ICICI
Bank. But the solace was always that it could lead in two retail segments – home and
auto loans. But now, even that edge is showing signs of distress.

While SBI has recently caught up with HDFC Bank in both home and auto loan growth,
ICICI Bank has also made a dramatic comeback. To counter, HDFC Bank is relying more
and more on growing their overall retail loan business, instead of trying to grow their
corporate loans, where the competition is even tougher with the likes of PNB & BoB,
apart from SBI & ICICI Bank.

The bank’s over reliance on retail segments like credit cards is troubling, and as Pralay
Mondal, their Country Head for Retail & Credit Cards had recently put it, the
delinquency for the credit card industry as a whole is at 30-35%.

HDFC Bank’s key problems are its highly pressured workforce and the private bank’s
too selective, too restrictive home loan policies that pre-empt a significant percentage of
homebuyers from a life-critical home loan.

Mumbai: Non-performing assets, an indicator of the banking industry’s health, have risen more
in public sector banks (PSBs) compared with the private lenders during April-June quarter,
according to an FE study. The net non-performing assets (NNPA ) of 14 private banks decreased
by 23.5% during the period as against a rise of 43.8% for 25 PSBs.

Milind Gadkari, GM, CARE Ratings, said, “Private sector banks had traditionally focused on
high return, short-medium term, unsecured retail lending products, personal loans and credit
cards. Therefore, they faced relatively higher NPAs as compared to PSBs. However, post
September 2008, private banks contracted their retail lending and stepped up their recovery
processes, thereby controlling increase in NPA levels. PSBs, on the other hand, reported higher
slippages especially from the restructured assets leading to an increase in GNPAs/ NNPAs in the
recent quarters.”

Gross non-performing assets (GNPA) of private banks increased 7.4% as against 37.2% of PSBs.
Among the PSBs, Indian Bank registered highest rise in GNPA, followed by Bank of India.

The average NNPAs to net advances ratio of 25 PSBs rose to 1.05% in April-June 2010 from
0.89% in the year-ago period. In private banks, the ratio decreased from 1.30% to 0.80% during
the period.

In absolute terms, NNPA of 14 private banks dipped from Rs 7,244 crore in April-June 2009 to
Rs 5,538 crore in April-June 2010. Among the private banks, Jammu & Kashmir Bank reported
the maximum drop in NNPA, followed by YES Bank. YES Bank’s key strength has been its
ability to maintain a healthy asset quality, despite the strong balance sheet growth in past years.
During Q1FY11, GNPA of the bank declined 2.8% year-on-year and NNPA fell 63.5%.

For PSBs, NNPA increased from Rs 13,926 crore

to Rs 20,026 crore. Indian Bank, Punjab National
Bank and State Bank of Travancore registered the
maximum NNPA among the nationalised banks.
State Bank of India, however, has not declared the
sticky loans figures so far.

Among private banks, NNPA of ICICI Bank

decreased from Rs 4,608 crore to Rs 3,456 crore
during the period. Net non-performing assets to
net advances ratio of ICICI Bank from 2.33% in the corresponding quarter last fiscal to 1.87% in
April-June 2010 and in ING Vysya Bank, it rose from 1.27 % to 1.36%. Top three private banks
according to the ratio of NNPAs to advances are DCB, ICICI Bank and ING Vysya Bank.

Among the PSBs, PNB increased its NNPAs to net advances ratio from 0.19% to 0.66% and
Indian Bank from 0.19% to 0.76%. The top three PSBs according to the ratio of NNPAs to
advances are Indian Overseas Bank, Bank of Maharashtra and Dena Bank.

The highest increase in NNPA during April-June 2010 was reported by Federal Bank among
private banks and Indian Bank among the PSBs.