New tax rate affects HDFC profitability in 2012

The HDFC Bank has taken immediate measures to improve sustainability of its operations and services despite the fluctuations of its profitability due to new tax rates.

The Bank recorded a 9% growth in the loan book and a 15% growth in deposits with a turnover increase of 14% in 2012. During the period the bank had also granted 12,500 loans worth of Rs. 3.6 billion with a profit before Tax of Rs. 122 million. Besides the low profitability of the bank that recorded due to the sharp increase in the interest rates in the market during last year, the bank also had to face the increase of the Corporate Tax rate to 28%. This was newly introduced to the Specialised Housing Banks by the budget of 2011, from a concessionary rate of 20% hither to enjoy from 2005.

Hence the tax needed to be paid at a higher rate by the bank for 2011 and 2012 has drastically impacted the bottom line. In order to minimise the impact and extend its services to customers continually with the highest standards of customer service and care the management of the HDFC Bank has already taken initiatives to introduce new products and services whilst taking effective measures to strategically reduce the non-performing loans.