We are living in an interconnected world with an interdependency which is going to get stronger in the coming years.
Leaps in technology, rising influence of social media, access to information at click of a button, progress in transport infrastructure and investors searching for profits beyond their territorial boundaries are some of the factors that have led to the majority of the economies converging into a synergetic marketplace.
However, recent history has shown that with these strong financial and economic linkages, we have to be prepared for the unexpected. Over the past 12-13 years, the world has seen several crisis situations that have shaken the foundation of long-held beliefs.
India has in recent years endured several crisis situations such as the global financial crisis of 2008-09, the US Fed's Taper Tantrum in 2013 and the IL&FS default in late 2018. The frequency at which these crisis situations have occurred has thrown forth its own set of unique challenges. Making predictions is proving to be impossible. Mathematical and statistical models have their own limitations. The common theme in past global economic instabilities was lure of greed and blatant disregard for ethical behaviour and good governance.
I personally never imagined in my wildest dreams that a health crisis, and not a financial crisis, would be the cause of such an economic catastrophe. Moreover, the sheer scale and speed of the unfolding human tragedy was overwhelming. The pandemic has affected the global economy by causing both aggregate supply and demand shocks. It reminds me of the term, 'butterfly effect', where a small change can affect the entire ecosystem.
The rumblings of the pandemic began in December 2019 or that is when we first heard about it. But like other epidemics in recent memory, it was thought that the spread would be limited, and a cure would be found sooner. Epidemics such as SARS and H5N1 avian influenza that occurred in early 2000s each impacted global economy by 0.1 per cent of its annual gross domestic product. The total fatalities from both these global epidemics are estimated to be just over 1,000. Covid-19 was different; the transmission is faster and it appears that it transmits through carriers who don't show any symptoms.
At HDFC, when we realised the magnitude of the crisis, we had to act immediately and with sound decisions. It was important for all of us to act calmly amidst the initial chaos. For instance, an area where we started to focus on intently due to Covid-19 is digitisation. In fact, in the housing finance space, we were the first ones to lay emphasis on online processing during the lockdown.
More specifically, we focused on an online digital platform for loans and retail deposits, initiated 'HDFC Customer Connect' for all customer requests and launched virtual offices for customer services.
Further, HDFC's website is now available in seven languages keeping in mind customers' comfort. To ensure smooth operations, we conducted a series of training workshops for our deposit agents so that they could seamlessly use the digital platform.
We also created a special team to bring in new perspectives and strategies related to IT and digitisation.
We established a cross-functional team, 'HDFC Digi-Future', to brainstorm and create a roadmap that focuses not just on future business processes but also on wider aspects pertaining to HDFC. We believe that this investment will bring in long-term benefits, including cost efficiencies, and marks an exciting journey as we prepare for the future.
Senior management was in constant touch with the board regarding the steps we were taking to handle the Covid-19 crisis and how we were managing our current and long-term risks. Of course, attaining operational efficiencies in the new working style environment and health & safety of employees remained a priority.
We have a business continuity management plan (BCP) which is designed with the objective of ensuring that there is an implementable, resilient business continuity strategy and framework to ensure continuation of business and minimal disruption of critical operations during a disaster.
The BCP entails continuous sensitisation among key identified emergency response teams and function response teams, along with other relevant stakeholders. This includes periodic BCP drills, tests and exercises, especially in the context of the disaster recovery site's capability in managing technology disaster at the primary data site. Other efforts include awareness drives, training and reviews for improvements.
A combination of faster-than-expected economic recovery, our thrust on digital initiatives and inherent demand for housing began to bear fruit as lockdown measures began to ease. We more than made a full recovery on individual housing loan disbursements from September itself. Our individual loan disbursements during the July-September quarter of the current year were 95 per cent of what they were in the July-September quarter of 2019.
In fact, in September and October, we saw a very strong recovery. In October 2020, we recorded 58 per cent growth in approvals and 35 per cent growth in disbursements over October 2019.
The crisis reiterated our belief and conviction that being prudent, adhering to strong governance practices and focusing on long-term growth are critical for any organisation to sustain. Numerous organisations have fallen off the cliff in relentless pursuit of market share with blatant disregard of the inherent risks.
Black swan events will happen but that does not mean we must not be prepared for unanticipated events. The crisis came as a reality check for many organisations across the world. One must never lose sight of risk and crisis management; and it must remain a priority for every organisation.
Here, I would like to mention that there cannot be any comprises on integrity. By taking the clean path, an organisation is often tested in its resolve to stand by its 'moral fortitude'. Good ethics are easy when fortune smiles. But character is tested when pressure mounts and uncertainty prevails. However, it should always be remembered that an ethical approach will always bring in long-term and sustained rewards.
Investors today rate companies on ethical practices and governance standards. Hence, the only way to prosper in the long term is to have zero tolerance for corruption.
2020 has been a difficult year with great hardships for many. When this is all over, we will look back and not be able to believe that such a scenario happened. I do hope and pray that 2021 is a year of opportunities, good health and growth.
(The author is Vice-Chairman & CEO, HDFC)
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