This interview is part of the Leading Asia series, which features in-depth conversations with some of the region’s most value-creating leaders on what it takes to realize bold ambitions and take them further.
In this Leading Asia interview, Aditya Puri talks to McKinsey senior partners, Alok Kshirsagar and Joydeep Sengupta, about his 26 years at the helm of HDFC Bank, during which time he transformed the organization from a fledgling start-up into one of India’s foremost financial institutions. This earned him the moniker of the “world’s best banker” by The Economist upon his retirement, having delivered total returns to shareholders far exceeding industry averages.1
Puri walked the talk at HDFC Bank, establishing an inclusive, shared culture and nurturing team motivation. He speaks of how he drove the bank’s success with disciplined risk management, an unwavering focus on the customer, and the enabling role of innovation. And he relates how, at the heart of his leadership, was an energy driven by a passion for excellence and flawless execution.
Joydeep Sengupta: In 2020, when you retired, HDFC Bank had some 56 million customers and over 5,400 branches—a remarkable achievement. Can you tell us what your purpose and ambition were when you started at the bank?
Aditya Puri: Our main purpose was to set up a world-class Indian bank, which would meet the needs and aspirations of all segments of the population of India in a transparent and convenient manner. Back then [in 1994], even the government recognized the need to improve efficiency in India’s banking system by introducing more competition and expanding across a wider geography.2 From my experience, the situation was clear: Foreign banks thrived because there was little competition—I was with one at the time and we thought we were kings of the world.
However, while foreign banks had the products and services, they lacked funding and reach. Nationalized banks, on the other hand, had the funding and the brand, but not the products or the ambition to grow their services.
As time went by, I thought: “What if someone could bring these two strengths together?” In such a large, financially underpenetrated economy, if these came together, we also could be kings. To grow, we needed a presence across the entire market, so we decided to support the SME [small and medium-size enterprises] sector, while waiting for the right moment regarding the consumer segment.
When the [2008] financial crisis struck, people ran out of personal loans and started seeking services, which was the perfect time for us to enter the consumer market. Within a year, we became leaders because we had learned from previous mistakes. Other banks had focused too much on the down market, ignored the high-reward customers, and failed to bring them fully into the relationship. We approached it systematically, and that made the difference. Within three years, we became second only to the State Bank of India in the SME sector.
What you need is an agile CEO with a clear vision, who can simplify that vision so it reaches everyone and leads to a flawless execution with scale and speed.
Alok Kshirsagar: I understand you had an approach of “first among equals.” Many employees stayed with the bank for decades—a rare achievement in Indian banking. How did you create this culture?
Aditya Puri: I set the tone right from the beginning. [I said] that the days of rigid hierarchy were behind us. I told the employees, “I’m the first among equals, and you’re here because of your passion and your capacity to deliver.” From day one, I made it clear that culture mattered. I wanted people who were just as passionate as I was. They should be happy coming to the bank, and we had to be fair to them and our stakeholders.
What you need is an agile CEO with a clear vision, who can simplify that vision so it reaches everyone and leads to a flawless execution with scale and speed. Beyond that, it was a team effort. I was the founder, but the real founders were the 200,000 team members who built the bank collectively. A combination of open discussion, measurement, and shared responsibility created a culture where dissent was welcome, but execution was flawless.
But equally important was employee well-being embedded into the culture and systems, such as establishing an employee trust in case they ever faced a [personal] calamity, as well as “skip level” assessments, where employees could give feedback directly to higher-ups, not as a formal evaluation, but to give feedback and critique.
At our bank, we built an incredibly motivated base of people who believed in the institution, trusted its culture, and felt that if they met their goals and the company succeeded, everyone benefited together.
Leading Asia
Joydeep Sengupta: How did you balance sticking to a long-term strategy with taking advantage of unexpected opportunities?
Aditya Puri: Our long-term plan was always focused on our customers’ needs, on business demands, and on what our competitors were doing. The issue for us was always clear: We were going to follow our plan.
If a short-term opportunity came up, we analyzed the risk. We decided that, at any point, 25 percent of the bank’s business had to come from areas we weren’t already in. For example, once corporate lending was established, 25 percent had to come from SMEs.
You’ve got to analyze the risks: Have you priced properly for it? What is the probability of default? What’s the cost-to-revenue ratio? What’s the total portfolio going to be? Those were always in mind. If a short-term opportunity would compromise any of those, I’d let it go. Frankly, most of the time, unless it was very clear-cut, we would pass.
Acquisitions were a different animal, but they followed the same principle. When we were considering Times Bank [in 2000], we were accretive from day one—we saw the customers, the branches, the capital they had, and the price made sense to us. The same applied to our other acquisitions.
Once you acquire a business, you need to be sure you’re achieving what you set out to do. They had to fit into our systems and follow our culture, including our values of trust, transparency, and customer focus.
Alok Kshirsagar: There’s a lot of hype about AI right now, and you’ve lived through many hype cycles. You don’t seem to view innovation as a risk, but rather as part of your risk assessment. Can you share more about that mindset?
Aditya Puri: We never bet on an innovation without testing it first. This was about taking calculated risks. I bet on my people. If they showed me that something could be done, we scaled it rapidly, but we measured our progress at every point in time.
As for AI, ask yourself, have you taken it to scale and realized its value? Now there’s generative AI: Where can it help? You don’t have to bet the whole bank on some dramatic change. Implement what gives you ROI and the operational changes needed. Don’t debate it forever. That’s how you keep an organization alive; that’s what we did.
For example, 15 to 20 years ago, some start-ups claimed they would eat traditional banks. I visited Silicon Valley with my senior team and saw they were using technology to change the business model by riding on our systems to offer products with a better user interface, less friction, and lower cost.
We acted by introducing a ten-second loan.3 Nobody could do it then—and many still can’t. If banks give up their strengths—trust, product knowledge, distribution—they will be vulnerable. The start-ups may have great interfaces, but they often lack our brand and distribution. Use technology to capitalize on your strengths.
When we launched the ten-second loan, we also empowered customers to “make your own loan,” so the money went straight to their accounts. Later, we began using AI and digital underwriting to give immediate decisions on large working-capital loans for SMEs.4 That often takes several days at most other banks. That’s technological innovation used to redesign the customer journey: a better interface, frictionless service, and at a lower cost. Technology is an enabler, not an end in itself.
You’ve got to walk the talk. The day you lose touch with the customer, you’ve lost everything. And if you want your team to have passion, you have to show it yourself.
Joydeep Sengupta: Switching to your own energy as a leader, what kept you going?
Aditya Puri: Energy was tied to the end goal. We were awarded the best brand in India. There were thousands of people who thought of [the bank] as their family, and we were all in it together. We enjoyed ourselves. We debated all ideas, and the best ones went into pilots. Most of the people who stayed did so because of a sense of achievement and belonging. Everyone felt that they were part of the success. I hope that feeling continues.
You’ve got to walk the talk. The day you lose touch with the customer, you’ve lost everything. And if you want your team to have passion, you have to show it yourself. For example, I visited a dudhwala—a milkman—who was running a sweet shop with a small milk business outside. We discovered that he had never banked with us. By the time we had finished, he had five current accounts. There were also two cars and a house we hadn’t yet financed.
I came back and deliberated with the team about how many people like him were in India. Experiences like this kept my energy alive—seeing opportunity, being in the market, connecting directly with customers, and showing the team what was possible.