Over the years, his wide networking skills made his office one of two or three stops for top global businessmen and officials visiting India. He has been called several times to handle crises, most recently the fraud at Satyam Computer. You were privileged if you were a member of the FoP (Friends of Parekh) club. After a remarkable innings that lasted 31 years, Mr Parekh is now stepping down from an executive role at HDFC. He recently spoke to Sucheta Dalal & Debashis Basu on a variety of issues. Excerpts from the interview:

 

DP: Yes, I was born in Mumbai in 1944. In the very early days, we were taken to Rangoon, Burma. My father was working there with the Central Bank of India as the ‘agent’, as the branch manager was called those days. In fact, there is an incredible story that he was the last man to lock the bank and leave during the war (World War II when the Japanese bombing started). He walked all the way from Rangoon to the Indian border in Assam. It took three months—you had to eat what you got; sleep where you could; there were many people walking and some even died on the way. There are horrendous stories from those days and it is a matter of sheer willpower and determination that he made it.

 

DP: Yes. My mother came back before the war, but my father had to remain there since he was in charge of the branch. I remember we had a picture of him with a full beard, because he couldn’t shave when he was walking. Also, there were no telephones those days, so he went to the closest place to send a telegram to my mother to tell her that he was alive and on his way back. It was horrendous. I don’t think our generation has suffered the kind of hardship our parents have, and they suffered less than their parents. In a sense, things are improving for each generation.

 

DP: Yes, I did my nursery as well as my early schooling there. I was in Burma for the first 10 years of my life. After that, it became necessary for us to move back to Bombay because Burmese became the medium of instruction. Earlier, we had to study Burmese as a second language in an English-medium school, but after the war, they banned all English-language schools and forced them to convert to local-language schools. Although we knew a little bit of Burmese at that time, this made it impossible for Indian students to stay there. So I came back to India with my mother and sister. This was much after the war—in fact, in 1954. After that, my mother shuttled up and down and we went there for vacations.

 

DP: A few more years. After he returned, he was posted in different places all over the country. He was in Delhi, Calcutta, Nagpur and Ahmedabad and, for the last 10 years of his career, at the head office here (in Mumbai). But we stayed on in Mumbai and used to go wherever he was posted only during the vacations. So we did our fair share of train travel. After leaving Burma in 1954, I went back seven years ago (in 2002) to celebrate my 25th wedding anniversary there. I took Smita and some friends with me. I found that the place hasn’t changed at all; it is lost in history. I have memories of Burma and it was exactly the same; it hasn’t changed in almost half a century. It is strange how a country can remain totally fossilised and away from the global view. I know that people have now started going there as tourists but, otherwise, the economy, the poverty, it is all the same. I tried to find the places I knew, but the English names have all been replaced by Burmese names. The school was Methodist English High School; it now has a Burmese name. The street on which we lived was Judah Ezekiel Street; it is called something else now. But I was able to find the house where we lived. I went there and rang the bell and said I have spent 10 years here and have a lot of happy memories. They wouldn’t allow me into the house because they didn’t speak English. Then I went there again the next day because I was determined to go in. Fortunately, the neighbours spoke a smattering of English, so they helped me to go in and see the house—it is a small two-bedroom place.

 

DP: I joined St Xavier’s High School when we returned from Burma. I was clear at that stage that I didn’t want to do science; I wanted to do commerce and economics. So I joined Sydenham College. Those days, it was recognised as one of the best colleges in Asia, although it has deteriorated a lot today. I didn’t want to be a banker; I thought I would do Chartered Accountancy. I didn’t know at that time whether to practise or to work in a company, but I was veering towards working in a company. Seeing how the profession was evolving, I probably took the right decision, because practice has become very complicated. So I went to Sydenham for four years and after my BCom I was fortunate to get an articleship in London to do my CA. Those days, they gave you a tiny stipend and the Reserve Bank of India (RBI) gave you just £50 for remittance. They gave permission to only some 15 students to go each year, and only after you had got your articleship.

 

DP: Yes, I was fortunate to get into a reasonably well-known firm in London. There was only one Indian in that firm and that was none other than Farrokh Kavarana of the Tatas. He was very British in his demeanour, and he was a rank-holder. He had gone two years before me and, in the first exam, he was a topper or at the second place in the entire UK. So everyone expected me to do as well as him. I didn’t; although I passed; and that was also pretty good those days. There were many others studying in London at that time between 1965 and 1969. Keki Dadiseth was there; then there were the sons of senior RBI officers; there were also a fair number of people from Calcutta. There were a lot of people from Price Waterhouse and Lovelock & Lewes; the senior partner of Ramaiya was there. Just last week, absolutely out of the blue, I got a call from someone who is the secretary general of the Institute of Chartered Accountants in England & Wales. They honour one individual every year and, this year, the jury has selected me. He said, “You are the first Indian to get it.” I didn’t even know they had something like this. I am not otherwise in touch with the Institute but I will go there in March. I will tell the story that, in those days, your salary doubled the day you passed the exam, even though you didn’t become twice as wise overnight. It is very difficult to pass the final exams, and I know people who just gave up and came back after five or six attempts. The Institute used to mail your results. You could make out from the envelope whether you had passed or failed. If it was heavy, you had passed, and if it was light, you had failed. If you passed, they used to include a membership form to the Institute.

 

The firm I did my CA from has grown. It used to be Whinney Murray & Co and is now Ernst & Young.SB Billimoria & Company used to be their Indian associate. My father used to be with Central Bank of India which was then a Tata-owned bank, and SB Billimoria & Co was its auditor. Until the RBI changed the rules, SB Billimoria used to have most of the bank audits.  So, when I passed, I requested the firm for a transfer to New York in its consultancy division.{break}

 

DP: I just felt that I had missed out on the campus experience in the US, or even in England. In Chartered Accountancy, there is no campus life. You attend office and you go to different offices to do audits. You are the junior-most when you start and you end up checking vouchers and ticking various entries, and then you get more responsible work like doing reconciliation and things like that. The exams are by correspondence; so you work all day; you get a very small amount of money and you have to study in the evening to prepare for the exams which you have to pass in four years. The firm had a very large consultancy division in New York. So I thought, let me go to New York and try my hand at consultancy rather than audit. They were kind enough to let me go to New York for a year and come back. I always intended to return and join Billimoria (SB Billimoria & Co).

 

DP: I was never enamoured of the idea of living abroad. Never. Not in England, and not even in the US. Getting a Green Card was easy those days and my firm said it would apply and get it in a month. I am talking about 1969. But I had no interest. I was in the US for one year and it was a good experience living in New York rather than London and doing consultancy rather than audits.

 

I did five or six assignments with different people and then returned. I took seven or eight weeks to come back. I left New York and hit the road, travelling through the US all alone—hitch-hiking, taking Greyhound buses, staying at different places with friends or in motels or wherever. I then spent two weeks in California with friends; then went to Hawaii and Tokyo and then Bangkok. I did all this alone in those seven weeks on the way back to India. I didn’t even tell my parents when I got back. I came in a taxi and I had spent the last rupee that I had. I rang the bell in the middle of the night and asked my parents for money to pay the taxi driver. Honestly! This is a true story. They knew I was on the road and expected me back, but had no idea when I would arrive.

 

So I came back and wanted to join Billimoria which used to audit Central Bank. We had a long history with the Bank—my grandfather also worked with Central Bank in Bombay for 35 years and my father was with Central Bank for 40 years.  So my family has been with Central Bank for nearly 75 years. Sir Sorabji Pochkhanawala, who started the Bank, hired my grandfather. I still remember him locking and opening the door of the Fort Branch.

 

There is another interesting episode of that time. Since you got so little money, you literally had to count your pennies. Since Central Bank had a branch in London, my father had arranged a £50 overdraft facility for me. The manager at London was a Parsi called Sammy Patel. I remember him as a thorough gentleman, always in a three-piece suit and very prim and proper—every time he wrote something, he would use a blotter on the excess ink. Then he got involved in a major scandal, so serious that Central Bank had to close down its London branch. He ran away with the money to Brazil and was caught there. It is a big scandal in Indian banking history; Sammy Patel’s has been the biggest fraud in Central Bank. Anyway, when Central Bank was nationalised, I was advised not to use the overdraft facility; not that I had ever used it very much, but one had so little money those days.

 

I remember it was my 21st birthday, just two months after I went to London in 1965. I had four friends who were doing accountancy and one was in the London School of Economics. I had only 10 shillings—or half a pound. I told them, “I will take you out for dinner but I will pay only two shillings and sixpence per person. If the bill is more than that, you will have to chip in.” And they all had to pay a few shillings each. I still remember counting the money in the restaurant to pay for the dinner. It wasn’t as difficult as walking from Burma, but we have seen some tight financial days.

 

DP: I still wanted to come back to India. I would have loved to join SB Billimoria. I went to the old man for a job, but he said, “Dikra (son), why did you come back?” Bank and insurance audits was their forte, apart from the Tata audits. After these were nationalised, SB Billimoria was losing clients left, right and centre. In later years, they built up the practice again with Yezdi Malegam and others. But, at that time, in 1970, they had been losing audits for the previous three years. They were not hiring. Central Bank was also nationalised, so I couldn’t be the third-generation person working there.

 

I was wondering what to do. First of all, I had come back with very long hair and the first thing my mother said was, “You can’t stay here unless you go for a haircut.” Then I went to see Namita Punjabi, a friend from London, who was then working with Grindlays Bank as an economist. Namita later became a famous restaurateur. She used to be in college with me and, later, when I was doing my CA, she was in Cambridge studying economics. I met her to see if there was any opening at Grindlays and she said, “Come and meet my boss.” I did that and he said, “We are willing to make you an offer, but we will have a job in six months, not now.” I accepted the offer but, instead of sitting at home, I worked with a company called Precision Fasteners which makes nuts and bolts for automobiles and trucks. My parents knew Sudhir Shah of Precision and I worked with them as the chief accountant for nearly nine months. So I had that little bit of industry experience before joining Grindlays Bank’s investment banking unit. It used to be called merchant banking those days and they handled all the public issues of multinational companies under the foreign exchange laws. So I was involved in nearly half a dozen pubic issues—Metal Box, GKW, Reckitt & Coleman, Indian Aluminium, Dunlop; these were all big Calcutta-based companies those days and they have all but disappeared. I used to be in Calcutta almost every week and handling these issues was a great experience.

 

Grindlays Bank was the only merchant bank at that time. Citibank had Dev Ahuja in what they called the Management Advisory Group or something like that. Citibank’s team used to sit in the Air-India Building and we were right opposite, in Express Towers.

 

DP: No, I worked with them for three years—from 1970 to 1973. The issue there was that the bank was separate from the merchant bank and there were a lot of intrigues in England over the fact that the merchant bank got all the limelight, so there was a lot of interference from London. At the same time, we needed the bank for underwriting—those days, all public issues had to be underwritten. I remember we worked on the public issue of Mangalore Chemicals & Fertilizers, which failed miserably and all the underwriters were stuck with it. Then the bank began to play a much larger role and that upset some of us. So everyone left, one by one. There were eight or nine of us—Joy Bhattacharya, Vikram Bhide, Farokh Broacha, Sidney Pinto, Rajat Purkayastha, Namita Punjabi—it was a small team. Three of us just decided to quit one day. I left without a job in hand. Then I got an offer from Chase Manhattan in their representative office here. They sent every youngster to Hong Kong and Singapore for a training programme, so I did that and came back to India. Those days, we only did foreign currency loans and correspondent banking, because we couldn’t have any income in India—it is the same even today. We could give foreign currency loans only to companies that had foreign capital coming in, so we lent mainly to shipping and transportation companies. We lent a lot of money to Air India and all the shipping companies.

 

In the mid 1970s, we had the first oil boom. Chase, being an American bank, wanted a lot of people to go to the Middle East, since the Americans were reluctant to go there. They were transferring me to Saudi Arabia to a joint venture they had there. They offered a very attractive salary and perks plus a two-month vacation, because it was a hardship post. But somehow I was not keen to go abroad and start again. After I returned from Hong Kong and Singapore, I got married.{break}

 

DP: By then, HTP (HT Parekh, the founder of Housing Development Finance Corporation, the most respected finance person of that time) was after me to join him. He said, “We are doing something new, why don’t you come and join us instead of running all over the world?” That tempted me, although it was a big financial loss to me. I joined at half my salary from Chase. I had a young family—one son—but I never regretted it.

 

DP: Yes, it was totally an experiment. In fact, those days, I heard outsiders saying, “We have two bubbles brewing in Mumbai—Reliance and HDFC.” They used to wonder which one will last and which will blow up. Reliance Industries was very new and growing rapidly, and we were also very new and nobody knew if we would succeed. This was in the late 1970s.

 

DP: The first thought was that you can trust a middle-class person to repay; everyone is not crooked and everyone does not default. Second, the legal system is mainly on paper, because even if you have a legally air-tight documentation, a civil suit takes forever to be decided. So one needed to figure out what kind of precautions and risk-mitigation measures one had to put in place to make this work. I remember meeting the Unit Trust of India chairman those days and he said, “It won’t succeed; people won’t pay back, so I can’t underwrite or buy the (HDFC) shares.”

 

DP: Yes, we did. We had to find some way to get around it. If we gave 70% of the white component, it became so insignificant that we could not really lend. For many years, our lending limit was Rs70,000. The agreement value would be much lower than the actual transaction amount. So we introduced a system whereby our technical people would go to the site and come up with what we called the ’appraised value’. So we gave 70% of the appraised value, which should not be more than the agreement value. In effect, in the early days, we funded most of the agreement value and the gap was funded by cash. That itself was around 30% to 40%. That was the practical solution. If we had waited for foreclosure laws, we would never have got them. And we couldn’t have waited for credit bureaus, which were set up only five years ago, or the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests) Act (debt recovery statute), which was passed only eight years ago. First, you had to have faith in the common man. It (a home) is the single-largest asset he buys; he is putting in 30% to 40% of the price on day one. Property prices in India, quite fortunately, have never gone down in the past 30 years, except for a couple of short blips.

 

DP: Yes. The service approach was ingrained in all of us. I remember in this very building, we were having a sandwich lunch and even if one customer walked in, we dropped our sandwich and ran out to serve him. We were waiting for customers in the early days. I must say that for the first 10 years of our operations, no one trusted us with his money on the retail side. We got funds from institutions, because ICICI had promoted it; IFC (Washington) was a co-promoter and we had a very good board. But, although we started the retail-deposit scheme from day one, people didn’t trust us with their savings; they only wanted money from us. It took 10 years.

 

DP: In fact, Narayana Murthy still says he had a wife next to him and an appointment letter in his pocket, but nowhere to live. He didn’t know anyone when he walked in, or who to meet. His wife stopped him and asked him to say a prayer at the steps of Ramon House (the HDFC head-office). There are many stories like these. If you put together the defence services people, government servants and police personnel who are our borrowers, they would account for nothing less than 20%-25% (of clientele).

 

DP: That is the thing we felt strongly about—how to give the best service, how not to get arrogant, how not to develop an ego and be complacent even if the borrower had nobody else to go to. In fact, for the first 10 years, we were the only housing finance company. In the early days, two of our managers, Pradip (Shah) and someone else went to Halifax and Abbey National (they were the two largest building societies in England) to learn their systems.

 

DP: Well, the public issue failed and devolved; it was in the very first year, 1978. It was a Rs100 share which started quoting at Rs80-Rs85 on listing. The first two–three years were very difficult. I remember we had our first borrower on the cover of our balance sheet. He was a guy named Remedios from Thane; 32 years ago, he took a Rs35,000 loan to build a small house on the land that he owned.

 

DP: Well, time just flew. I didn’t have the time to think about whether I should do something else or look for something else or have my CV prepared.

 

DP: First of all, it was tough being the nephew of HT Parekh. It was a handicap. I had to prove my credentials, even after I became chairman. It played a lot on my mind that people think you are there because of him, especially in the early days.  As for the rest, when I was in Grindlays Bank, they were bankers to the Bombay Scottish School—those days, it was also an orphanage. My boss, who was Scottish, was the treasurer and trustee of Bombay Scottish. Those days, there were only Protestant-Christian Scottish people on the board.  I used to help him with the bank statements, fees reconciliation and all kinds of things. When he was transferred back, he said, “Why don’t you take over my job since you are already doing it?” So I have been a trustee of Bombay Scottish for the past 37 years. According to its constitution, only Protestants can be its trustees, except for the treasurer and vice-chairman. So I am vice-chairman and treasurer. Then, over time, people asked and I got involved with different charities and organisations. My weakness is that I can’t say no, so I got involved with far too many things—more than I can, or should, take on.{break} 

 

DP: Well, competition has intensified in the past 10 years. First, it was banks setting up separate subsidiaries for housing finance; practically every bank had a housing subsidiary. Their experience has been disastrous. Only one or two are still operational. That was the first wave. Then every builder started a housing finance company; then, the non-banking finance companies started housing finance and, now, the banks are in housing loans. So we have had all kinds of competition, but that only makes us more agile and more realistic. So competition in any industry is good; it keeps you awake.

 

Our decision to set up HDFC Bank came when the RBI, after many decades, put out a little advertisement saying it was willing to consider permitting new private-sector banks and interested people could apply. There was no format or anything. We applied after getting the board approval, because Rs100 crore of capital was required and we had to get a feasibility report prepared. So we hired an ex-banker as our consultant and advisor and asked him to prepare a report. He was Atul Sud, who used to be with American Express Bank, and he did a very good job with the report. SS Marathe was the chairman of a small group that was set up by the RBI to consider the new bank applications and he subsequently told me that our application was the best. They had received 123 applications; some were even on postcards. We were the first to get a licence, but when we went to our board, they said, “What is the use of a bank?” So, basically we saw it as an investment. Also, there were no foreclosure laws and we thought that for a rainy day, it helps to have an investment which is doing well. In fact, HTP was not keen on the bank at all. He said, “We don’t have the expertise. Who will run it? How will it be run?” So I said we had too much exposure in one industry and one product; we needed to diversify and have some income coming from somewhere else. In fact, a number of companies have started here, in this office. Credit ratings company CRISIL, Infrastructure Leasing & Financial Services (IL&FS), Infrastructure Development and Finance Company (IDFC), personal ratings company CIBIL, all started here. We were one of the promoters of CIBIL in the initial years, so we had given them one room to start their work. Nasser Munjee had a room here, so we launched IDFC from here. Ravi Parthasarathy sat here for three–four months before IL&FS started. At that time, every bank was starting a non-banking finance company (NBFC). Central Bank didn’t do anything and its two largest customers were UTI and HDFC. MN Goiporia was its chairman. You know that I have a soft corner for Central Bank. I said it is good for us to start something with them.

 

Mr Goiporia, MJ Pherwani (then chairman of UTI) and I went to see the RBI governor, Ram Malhotra, together and he advised that if we have 49.5% government holding, we don’t have the hassle of CVC (Central Vigilance Commission) and CAG (Comptroller & Auditor General). So the structure for IL&FS was 50:50, because UTI was never considered to be a public-sector venture even in those days.

 

DP: Well, basically they (IL&FS and IDFC) are NBFCs that lend to infrastructure. These projects take a long time to fructify and even longer to make money. But if you have share capital, investors want returns, they want dividend or interest income or some returns from structured products. No one has the patience today to wait for five years for returns, and the unfortunate part is that, technically, no infrastructure project can give you returns for five years. A 4,000MW power project will take five to seven years to pay the first dividend. Who has the patience to wait that long? Everybody wants at least capital appreciation which will allow them to exit.

 

Today, with quarterly accounts, everybody wants to show some growth in numbers every quarter. And the way the analysts and the capital markets are working today, you can’t afford to invest in any sector where the returns are back-ended. We, at IDFC, are willing to give 10-year money but there isn’t a single company willing to take a 10-year loan for infrastructure. First of all, 10-year money is more expensive than one-year or two-year money. They would rather take 10-year money with annual rate adjustments so that it becomes a one-year loan. It is not that the types of infrastructure projects we want are not happening. But they are not enough. Look at the Tirupur water project and how long it took us to get it done. The first private toll bridge was between Rau and Pithampur in Madhya Pradesh. I remember when that road was tolled, we had to shut for 15 days because of public agitation; people blocked the roads and were refusing to pay the toll. I had to call LK Advani and request him to help us. I told him it is a public road but we have to charge and we have the state government approvals to do so. That was the experience with the first toll road.

 

DP: Again, we were the first to get the life insurance licence, and then non-life and asset management. I think these companies have done well and they have created value for us, although it has taken time. But you have to spend time on these subsidiaries. You have to have some hold, some control and supervision. But it has been a good 10 years and this growth has been outside HDFC. HDFC, as we say, is on auto-pilot because the demand for housing is insatiable. So long as our systems, procedures, efficiency and service continue, we will do all right.

 

DP: The issue really is SLR (statutory liquidity ratio) and CRR (cash reserve ratio). Our balance sheet is Rs1 lakh crore today. On that, we will need Rs30,000 crore to maintain the statutory reserves. Now our public deposits require SLR of 12.5%, which is around Rs3,000 crore. But we still need Rs27,000 crore. And then there is a multiplier effect—if you borrow, you need to maintain statutory reserves on that too; so the compounding number will be even more. And, on 5% of that money, you don’t earn any interest; on the rest, you earn a negative spread of a couple of percentage points. So, on Rs5,000 crore, you earn nothing, and on another Rs25,000 crore, there is a loss. When mergers take place, there are either economies of scale or one of the two entities is either in a bad shape or there are growth issues, funding issues, management issues or NPAs. At the moment, both are growing and doing reasonably well. We have bottom-line and top-line growth and there is no crisis that we need to spend this kind of money or borrow this kind or money or raise capital and put it in government securities. The only beneficiary here is the government; unless we get some kind of exemptions from the government—for instance, if your NPAs are below 1%, I don’t see any harm in the RBI giving us three years to be SLR-compliant while maintaining the CRR from day one. But the RBI has its own issues. It says you can’t be a kind of bank for three years and be fully compliant only later. It is also worried about setting up precedents because every NBFC will want to be a bank on similar terms. So we have discussed the merger, but this is one of the biggest stumbling blocks and the need is not there. But, today, I seriously feel that in banking we need a small number of large banks, not a large number of small banks. And I think consolidation in the banking industry and, in fact, in many other industries is necessary. India’s strength in the future will only be there if there are stronger industries, whether it is airlines, insurance, banking or manufacturing—and even the media. State Bank of India must automatically merge its subsidiaries. But even after doing that, it will become the most dominant bank and you need one or two other banks of a similar size. You need Punjab National Bank in the north and Canara Bank and Bank of Baroda in the south and west to take over one or two of the smaller, compatible public-sector banks to create larger entities. We don’t need so many banks.{break}

 

DP: We have enough protection from the present rulings of the government on this issue. For instance, no bank can hold more than 5%. In our case, we have over 400 investors; and I have seen, in my past 15 years’ experience, since foreign money started coming in, that no two FIIs talk to each other. They also have their own likes and dislikes; and there are so many of them that I don’t see companies, even in Singapore, talking to each other.

 

So I don’t see that in the foreseeable future some institutions will get together, get 15% of HDFC, make a bid for it and then buy another 20% through an open offer. And we now have an indication that SEBI is reviewing the takeover norms. So there is some rethink which will make it even more difficult to make a hostile bid.

 

DP: Firstly, I think there is total unanimity in the view that India will grow significantly in the next five years. This is the view on all corporate boards—large, medium and small—all over the world. There is a unanimous view that India will be an economic power in 20 years. There is reasonable unanimity in the view that doing business in India is not easy. Starting and running businesses is complex and complicated, and one of the main reasons is bureaucracy. Over 90% confirm that corruption is a way of life, but nearly 40% do not pay anything, although it is talked about. I have never paid anyone. These are some of the common perceptions about India.

 

DP: For Indian companies, the failure is leverage. The expectations of Indian companies are too high. I don’t think they have enough maturity to leave money on the table, and they always feel that their company is much more than it is. I can say this because this company does not belong to me. But in companies where the promoter owns 60% to 70%, it is a problem. You see this in how the IPOs (initial public offerings) are priced. It shows that the price asked was too high. So I would say that high valuations impact the company and the capital markets. Another issue is that people want to grow without diluting their stake. Consider that today there is no Mr Philips, Mr Siemens, Mr Proctor, Mr Gamble, Mr Larsen or Mr Toubro—all the companies that bear their names were started by individuals who are not associated with them anymore. I can’t see a situation where 20 years later, there will be companies which are known by individual names but the promoter families are no longer connected with them. Promoters holding on to their companies is more common in India. And everybody wants more leverage.

 

In one of our PMAC (Primary Market Advisory Committee) meetings, we discussed that if I am a promoter and have pledged my shares to someone, it must be made public. Now, it has to be disclosed in the quarterly announcements. I think that is absolutely necessary. When that rule came, everybody started to say that we will pay back, make some arrangements and not show to the world outside that our shares are pledged. Earlier, people were just borrowing against the old shares, setting up new companies, raising capital and paying it back.

 

DP: Yes, in India nobody ever goes under. Even the pain that we had in real estate in November-December last year (2008) was too little and too short. No developer went under. I don’t think we can keep on assuming that money will be available easily, it will be cheap and global liquidity will be very high.

 

Today, banks are desperate to lend because credit growth is not there and so entrepreneurs are sitting pretty. But that may change—last October-November, even we (HDFC) could not raise money. Banks, which were offering us money just one day earlier at 9%, suddenly wanted 15%—we are AAA-rated since inception, but suddenly risk became too much. We had to press our accelerator on retail deposits in those six months. We re-mobilised our brokers, who were fortunately always there. And, if you see our disbursements in October-November, 90% came from fresh retail deposits. But since we had the brand name and branches, retail deposits really helped us in those months when wholesale funding became very difficult and expensive.

 

DP: Personally, I would say that the high point was that, despite gruelling schedules and long 18-hour days, early mornings and late-night flights, extra-curricular activities, board meetings, etc, my health did not give in. I have really taken advantage of that. Not being involved in any controversy at HDFC in the past 32 years and being regarded as an open, transparent and clean organisation is also an achievement, I think, in India.

 

There is also another high point. A common question 25-year-old analysts ask me is, “What keeps you awake at night, Mr Parekh?” And my answer is, “Nothing keeps me awake at night.” I can’t really think of disappointments…  maybe one. I think we could have, and should have, developed construction capabilities. In fact, we started a company called HDFC Developers and we built some housing in Vashi (Navi Mumbai) and in Pimpri-Chinchwad near Pune. But, in those early days, we were told by the RBI that you can either be a finance company or you can be in construction—you can’t be in both. So HDFC Developers became more or less defunct—it only builds our own offices. We could not take up mass housing projects for, say, 1,000 or 2,000 homes. That would have automatically brought lending business to HDFC and it would have allowed us to provide affordable housing.

 

So in terms of disappointment, I would have liked to see more supply come in—supply of housing or land in cities like Mumbai. Why do we need a dairy on the sea face or a prison in the middle of the city? If the government had the vision, that land could be used to remove big chunks of the slums in the city. In Singapore, you see incremental improvement every time you go there and the old Singapore is also changing. But, somehow, we don’t see that here.

 

DP: I haven’t taken a decision as yet. My office colleagues believe there will be no change—my office is the same and so is my secretarial staff. I will do something, but I don’t want to make a commitment right away and I have also to give up some of the things I am doing, including the boards of companies on which I have been for many years. I have got some offers, but I have not said ‘yes’ to anything yet. Let me first step down and think through what I can give up and how much I can take on. I am open to options.