A STUDY ON RISK AVERSION STRATEGIES FOLLOWED BY HDFC BANK DURING INVESTMENT DECISIONS

Abstract

Risk aversion is a fundamental principle governing investment strategy in commercial banking. HDFC Bank, India's largest private sector bank by market capitalisation, employs a multi-layered risk management framework to balance return maximisation with capital preservation across its investment portfolio. This paper studies the risk aversion strategies practised by HDFC Bank during investment decisions, encompassing asset allocation discipline, credit risk mitigation, interest rate risk management, liquidity buffer maintenance, and regulatory compliance-driven portfolio constraints. Primary data was gathered through structured questionnaires administered to 120 respondents comprising HDFC Bank investment officers, treasury professionals, and institutional clients. Secondary data was drawn from HDFC Bank Annual Reports (2021–2024), RBI circulars, SEBI guidelines, and peer-reviewed academic literature. Analysis reveals that HDFC Bank systematically prioritises government securities and high-rated corporate bonds, applies strict duration limits to manage interest rate exposure, and maintains a Liquidity Coverage Ratio (LCR) consistently above the regulatory minimum. The study identifies key risk aversion mechanisms including Value-at-Risk (VaR) limits, stress testing, concentration limits, and dynamic hedging strategies. Findings confirm that structured risk aversion significantly reduces portfolio volatility while sustaining competitive risk-adjusted returns.