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Ms Chanda Kochhar, CEO-designate, ICICI Bank

K. Ramkumar
Priya Nair

Mumbai, Dec. 24 ICICI Bank, the largest private sector bank in the country, plans to curtail its dependence on direct sales agents (DSAs) for sourcing retail loans in order to bring down costs. Instead, the bank, in a deliberate strategy shift, wants to leverage its countrywide network of 1,400 branches to garner more business.

With the Reserve Bank of India granting it additional 580 branch licences, ICICI Bank, according to its MD & CEO designate, Ms Chanda Kochhar, sees ample scope for ramping up direct sourcing of retail loans by branches, which will expand to around 2,000 by end-March 2010. Currently, DSAs source almost one-third of the bank’s retail loans.

Retail loans accounted for around 55 per cent of the bank’s total advances portfolio, which stood at Rs.2,22,000 crore as on September-end 2008.

“We are looking to maximise the productivity from our branches and trying to get the most out of them. The residual business will keep coming from DSAs. Our branches have the capability to sell a wide spectrum of products and services. In the current volatile scenario, we feel that the best customer is one who already has an account with us. We would directly lend to that customer through our branches, rather than through agents. Business for DSAs is going to be lower. We are distributing more and more through our branches as our on- the-ground presence has doubled,” Ms Kochhar said.

Engaging the services of a direct marketing agency for sourcing business, she pointed out, was a more expensive proposition than garnering business directly through branches. In terms of cost, it would make a big difference. In this regard, she pointed out that the bank has stopped garnering two-wheeler business through dealers and agents.

“When we started our retail operations, we had very few branches and had to rely on many other forms of distribution to grow and reach the customer. With a 1,400 strong branch network, there is a lot that our branches can now do,” she said.

Emphasising that cost cutting was a matter of improving efficiencies, Ms Kochhar said the bank has not rationalised staff nor had it cut salaries. The bank has tackled costs by rationalising distribution and marketing expenses, negotiating with vendors for better rates, etc.

“We haven’t had to and don’t intend to retrench people. We have undertaken lot of productivity improvement in the processes which saved costs, and spared people for redeployments in other areas,” the MD & CEO designate said.

Expenses on direct marketing agents nearly halved to Rs 145 crore in the second quarter ended September 30, 2008, as against Rs 385 crore in the corresponding quarter last year.

Ms Kochhar pointed out that on the retail side, borrowers were servicing mortgages and car loans, while there were some losses on the personal loans or credit cards front.

More Stories on : Private Banks | Credit Market | ICICI Bank Ltd

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