HDFC Bank has crossed State Bank of India (SBI) in market cap, not asset size.  This is really commendable achievement considering that it is only one sixth the size of SBI.

HDFC Bank's performance also points out that asset size is not crucial to performance and, therefore, the quest for consolidation in India's commercial banks is misplaced.  

Prof TT Ram Mohan writes about HDFC Bank did not turn into a stellar performer recently; it was among the best performers in Indian banking when it had an asset size of Rs 50,000 crore. It had one of the highest net interest margins in the business while having only around 300-400 branches. It has delivered profit growth of 30% every quarter for years now.

HDFC Bank is representative in many ways of what might be called the 'Indian banking model. In this model you stick to the basics: retail deposits, managing credit risk, staying away from fancy structured products and concentrating on the home market. Do a good job of this and you will be in the front rank of international banks as the Indian economy booms for another 10 years or so. If a bank is attempting something else, one needs to be wary. Why would you attempt something fancy when the simple works- as in the case of HDFC Bank?

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