The Hindu Business Line : ‘Market share will not be the only driving factor’

As a country we need investment in infrastructure, manufacturing capacity, core industries, and so on. I would like ICICI Bank to play a catalyst’s role in the creation of a new India.

CHANDA KOCHHAR, CEO-DESIGNATE, ICICI BANK

K. Ram Kumar
Priya Nair

Ms Chanda Kochhar’s appointment as the CEO and MD of ICICI Bank may seem a natural succession. Having joined the institution almost 25 years ago, she has handled various responsibilities in different departments. She was part of the team that helped the organisation transform from a developmental financial institution into a retail bank. In an interview with Business Line, she talks about her vision for the bank, the challenges before the banking sector, ICICI Bank’s strategy for growth and how India will recover from the global slowdown faster than other economies.

Excerpts from the interview:

ICICI Bank has been number one in several segments. But in the recent past it has lost market share to competitors? What is your strategy to regain that?

The approach has to change with the environment. In a growth environment, as we were rolling out the business, and since we were new to the business, we had to have a vision. So, we had to move in a direction that would take us to the Number 1 position.

Now we have established our credentials as Number 1. In an environment where interest rates are so volatile, it is more important to protect margins. So, we think that lending makes sense at a certain rate and with certain credit parameters, because we want to protect the asset quality and interest margins.

Market share will not be the only driving factor. The current environment demands conserving capital, conserving liquidity and watching the impact of the environment continuously.

Why have you exited two-wheelers and auto loans, in which you were once aggressive?

Auto business continues like before. On the two-wheeler side, we have started marketing only through our branches, and not through the agents. For two reasons. Over the last 15 months or so we have doubled the number of branches. A year ago, we were at about 700 branches. We now have 1,400 branches. The branches have the capability to sell more and more products. It is the process of evolution of an organisation. When we started, we had very few branches and, therefore, we had to rely on many other forms of distribution to grow and to get to the customer. Now the organisation has evolved to a level where the dependence on outside agents will come down because the branches can do much more.

What kind of transformation would you like to see in ICICI by the time your tenure comes to an end in five years time?

I would like to see ICICI Bank as one that makes even more of an impact on the growth of the country. I see the next five years as being a period where actually the country will invest. Because of what has happened globally there was a pause in investment. But as a country we need investment in infrastructure, manufacturing capacity, core industries, and so on. I would like ICICI Bank to play a catalyst’s role in the creation of a new India.

In the next fiscal, and in the medium term, where do you see growth coming from?

Next year the cycle has to change and that will bring back growth. I see growth coming from both retail and corporate sectors. On the retail side, if interest rates correct, simultaneously real estate prices will also correct to some extent. These two things together will restart the demand on the retail side. At these rates people want to wait and watch.

On the corporate side, growth will start after the corporates finish going through their adjustment process on their inventory build-up. Currently, a lot of inventory has been built up because the demand has slowed down. Over a quarter or two, the existing inventory will get wound down and corporates will build new inventory at low raw material cost. Once that happens and there is a stabilisation process, then corporates will think of building further capacity.

Considering that during times of downturn, a lot of NPAs will show up on the books for banks, how are you managing asset quality?

It’s not necessary that lot of NPAs will show up. Given the fact that the debt levels of Indian corporates are very low, the servicing of debt is not going to come under threat. I don’t expect NPAs to get built up for banking sector as a whole.

On the retail side, people are servicing mortgages and car loans. In personal loans that which are unsecured or against credit cards, to some extent, there have been some increase in losses. If people have priority for income, if bonuses are lower, people will pay off mortgages and not pay off credit card charges. These dues will rise for the industry.

When do you see a turnaround in the economic slowdown?

Globally we still have some way to go, because the real economy is still going through some pain. It is too early to say when it will start turning back. My feeling is, whenever the turnaround starts it will start faster for India than other countries. In India there are positive signs. Inflation has corrected so much that interest rates are gradually correcting. We saw bond rates correcting. Wholesale deposit rates are starting to correct. Lending rates have to correct and that will start the cycle again, because fundamentally we still have demographic advantages in our country, we still have the requirements of investment. We have to give it that much time for interest rates and real estate prices to correct, and time for inventory wind-down to happen on the corporate side. What will be the most difficult task after you take over as CEO in May 2009?

The most challenging part would be not to get bogged down by challenges. Today the situation is that the environment is very challenging. If as a leader you get bogged down with that then you miss out on the opportunities of optimism.

You have to keep one eye on reality, you cannot ignore reality. You have to keep one eye on the future. When times are good, everybody looks at the future. Everybody is very optimistic. But when times are bad, everybody starts behaving as if the world is coming to an end. You have to take a balanced view — take care of the present, but be optimistic for the future.

How do you reinforce depositors’ confidence as you are a private sector bank? For a PSU bank there is government backing, but how will a private bank handle it?

You have to ensure that performance is always good, profitability is good, capital adequacy is strong. So that some strong fundamentals we talk about continue to remain strong. Our capital adequacy, which is the basic measure of any bank’s strength, is the highest. It is almost 15 per cent now. Actually 14.8 per cent, with just Tier I being 11 per cent.

We have two responsibilities. Achieve good performance, because performance speaks for itself. And continue to communicate with customers in order to reinforce their confidence.

More Stories on : Interview | Private Banks | ICICI Bank Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Price signals and the farmer

Trading in protectionism?

Getting things done

Sensitivity and information flow

The challenge before RBI

‘Market share will not be the only driving factor’

Self-reliance

Co-operative banks