Flashback Friday: How HDFC entered the banking business

The merger of Housing Development Finance Corporation Limited and HDFC Bank, which came into effect from July 1, has led to the bank’s entry into the world's top 10 financial institutions. In a LinkedIn post titled 'Revisiting The Story Of HDFC Bank And Early Days Of HDFC', veteran business journalist Tamal Bandyopadhyay delved into HDFC Bank’s initial journey, based on an extract from his book 'A Bank for the Buck'.

Picking out the key players

The story began on a February morning in 1994, when Parekh made a phone call to Aditya Puri, an old friend and theCEO of the Malaysia operations of Citibank. Parekh flew to Kuala Lumpur and told Puri that HDFC was in the process of obtaining a license from the Reserve Bank of India (RBI) to start a bank and that he was looking for a CEO.

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Parekh had decided that Puri was the one capable enough to lead and build a top-notch private bank in the newly liberalised environment in India; one thatcould compete with other global banks. Puri considered Parekh’s offer after he promised Puri a good share of the institution’s stock.

Before Puri, Parekh had contacted SS Thakur, who previously served as the Controller of Foreign Exchanges in India. Parekh asked Thakur to be the bank’s Founder-Chairman. Thakur eventually joined HDFC Bank in January 1994. He was the one who helped the newly-launched bank gather bulk deposits as people were unwilling to put deposits along with home loans.

Lastly, Parekh had appealledto Vinod Yennemadi, a close friend and a corporate executive, to join him in Bombay to establish the bank. Initially, Yennemadi declined the offer saying that he wasn’t a banker. But Parekh convinced him to join, arguing that he could learn on the job.He eventually joined the bank in April 1994.

Selecting a name

Bank of Bombay (BoB) was the initial name decided for the upcoming bank, which directly clashed with the well-known Bank of Baroda (BoB). Bombay Bank, Greater Bank of Bombay, Everest Bank of India and Bombay International Bank were other names suggested by Parekh.

Eventually, the bank was named HDFC Bank after a majority voted for the name. Initially, Parekh was not in favour of naming the bank HDFC, as he believed that the brand would suffer if the bank failed to take off. But it was also argued that HDFC was already a renowned brand and would help the new bank cash-in on the brand's goodwill.