HDFC Bank has reported a downfall in its Stock Prices in the last few trading sessions. What are the possible reasons behind this fall in the stock price? To Know, read this blog!
Introduction:
Mr. Sashidhar Jagdishan, New MD & CEO of HDFC Bank has raised concerns about the retail loans. Now We will be getting to know, why HDFC Bank was behind corporate loans and SME loans instead of Retail Loans in the recent past. Let’s discuss the possible reason behind this fall in stock price.
Concerns over Retail Loan
- The Bank believes that people who had taken moratorium or have done loan restructuring on retail loan in COVID 1st wave could face the same problem in this 2nd wave of COVID. This could be one of the reasons why a bank can come into a problem. Therefore this could be the one reason why HDFC Bank had diverted its focus on corporate loans or SME loans.
- Mr. Shashidhar Jagdeesan also expects that in the coming 1 or 2 quarters there could be some slippages in retail loans. He further added that there will be no severe impact or distress. These things will be under control but retail loans will be facing some trouble.
- Retail-oriented banks or retail loan-specific banks might face some problems due to these COVID situations.
- HDFC Bank is still having a strong Liabilities Book such as deposits, saving accounts, and the current account.
- There could be a problem to those banks who are giving retail loans such as Small Finance Banks, Microfinance banking Institution, Retail oriented Banks which has a focus in micro-lending like Bandhan Bank, etc. such banks might be in more pressure in coming few quarters.
- There is a new opportunity for the HDFC Bank has opened which is towards corporate loans, SME Loans in which other traditional banks or wholesale banks were not focusing. Therefore they will handle this situation very well.
- Hence these concerns by the Head of the bank have resulted in the correction in the stock price.
RBI restriction on Credit card business
- Another reason for the fall in Stock prices of HDFC Bank is the restriction on its Credit Card Business.
- These restrictions are happening due to digital fallouts which have happened 2-3 times in the last 1-2 years which has been strictly noted by the RBI.
- But the Banks are taking it on the positive side. HDFC Bank has told it will come up with some solution or service which will be much better compared to other competitors.
- Being the biggest player in the private sector space they are also worried about and will be working on this particular front of their Credit Card Business.
Conclusion:
Hence these corrections in HDFC Bank could be a great opportunity to buy for Long-Term Investors. Do proper research and study before investing in any stock, also consult your financial advisors before making any investment decisions.
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