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Mr Romesh Sobti

S. Bridget Leena

Chennai, Sept. 25 In the Indian banking sector, Mr Romesh Sobti’s name has long been synonymous with ABN Amro Bank, where he was the Executive Vice-President – Country Executive, India, and Head, UAE and Sub-continent.

Seven months ago, he quit the Dutch multinational to join the Hinduja-group promoted, new generation private sector bank, IndusInd Bank.

At that time, IndusInd Bank was not doing very well. For the last quarter of 2007-08, it had reported a 32 per cent decline in net profit (Rs 14 crore).

It had begun its innings as a corporate bank and was struggling to raise its retail portfolio, which did not happen the way it was planned even with the merger of the other Hinduja-promoted NBFC, Ashok Leyland Finance, in 2003. Its CASA was just around 17 of deposits, much lower than its peers. It had missed the bus during the days of roaring treasury profits between 2002 and 2006.

In steps Mr Sobti, with 33 years of experience in the banking sector.

Naturally, his coming on board has raised a lot of expectations. In an interview to Business Line, Mr Sobti, who has a Bachelors Degree (Honours) in electrical engineering and a Diploma in Corporate Laws and Practice, explains the roadmap he has designed for the bank. Excerpts:

What have you done in the last seven months and planned for the next three years?

We have restructured the bank business as consumer, corporate and small enterprise. We would keenly focus on three major parameters — productivity, profitability and efficiency — which would be driving the growth for the bank in the next three years.

Can you elaborate?

This will be restructuring of balance sheet, capital – quality of assets, mix of assets and liabilities. Our focus will be on growing our revenues and cutting costs.

At present, the cost to revenue ratio is about 70 per cent, which we target to reduce to 50 per cent in the next three years. This we plan to do by bringing down the cost to revenue ratio by six to seven per cent each year.

We would cut a large portion of the fixed cost (vendor arrangement and annual maintenance cost) and make it variable cost. Good employees will be rewarded via ESOPs.

The bank cannot afford to offer fancy packages but if the employee builds the net worth of the bank, market will reward them automatically, which is why they are given stock options.

The rumour in the market is that you have you been brought in to make the bank look attractive and then sell it.

I am not here to “dress up the bank”. We want to fundamentally make the bank financially strong and have no intentions to sell.

People are not fooled by the cosmetics ; they look at the financial fundamentals and would want to buy a bank that has been well managed.

Three years hence we will look at acquiring a bank, when our fundamental finances are strong.

How has the Ashok Leyland Finance (ALF) merger been for the bank?

ALF’s merger with the bank in 2003 was done to shore-up the bank’s capital. The ALF merger was like a lifeline to IndusInd Bank.

Although ALF financials were strong, it had problems as well — the NBFC did large securitisation deals. But with changes in securitisation regulations by RBI, it was caught on the wrong foot. Therefore, integration has not happened in a true sense.

‘Integration’ means the bank is able to cross-sell its products and services to ALF’s eight lakh customers. The bank has not been able to tap the ALF clientele for selling other products (other than vehicle finance).

Of the nine new generation banks that were promoted in 1994, four were lending institution — ICICI, IDBI, UTI and HDFC. Only IndusInd Bank is the survivor among the five banks that were promoted by private players – Times Bank was the first to wind up. Global Trust Bank merged with Oriental Bank of Commerce. Centurion Bank and Bank of Punjab also met the same fate.

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