‘Our retail business is well diversified’

IndusInd Bank is one of the largest commercial vehicle financiers in the country. While the slowdown in CV sales has impacted the pace of growth, diversifying into other retail segments has offset some of the slack.

Romesh Sobti, Managing Director and CEO, feels the bank is on the cusp of a gradual recovery in vehicle financing.

Edited excerpts of an interview:

How has the economic slowdown impacted you?

It has been a double-edged sword with slower growth and higher inflation. We have managed growth by balancing our wholesale and retail businesses. In the wholesale space we have focussed on working capital and this segment continues to grow.

Our retail business is well diversified and, therefore, slower growth in certain segments is offset by higher growth in others. We have coped well in this environment by consistently delivering over 30 per cent earnings growth.

Over the last three years, your bank’s lending has grown 29 per cent annually. Can you sustain this growth rate?

We believe we can outperform industry growth while maintaining profitability and asset quality. We raised ₹2,000 crore through a QIP (qualified institutional placement), which will enable growth. We expect to grow our lending at over 20 per cent.

In the last three quarters, the pace of growth in the retail segment has significantly come down. What is the outlook for this segment?

A slowing vehicle financing market has pulled down the overall retail growth. We are now on the cusp of a gradual recovery in vehicle financing.

Simultaneously, we are seeing good traction in other retail business, such as loans against property (LAP), and products such as gold and personal loans.

These products will make up for some of the slack in the retail space.

How do you plan to build your low-cost CASA base? What is the strategy for branch expansion?

This year we will close at around 620 branches.

By 2016, we will touch 1,000 branches, so we continue to invest in the CASA franchise. Overall, CASA system growth has trended lower in the last couple of years.

High inflation has resulted in a lower savings rate in the economy. We bucked the trend with 30 per cent CASA growth in this period. We want to raise our CASA ratio to around 35 per cent in the next 18 months.

There was some stress visible in both corporate and retail loan books in the December quarter. What is the internal strategy to contain asset quality pressures?

We continue to focus on high quality underwriting, efficient collection, and a diversified mix between our wholesale and retail businesses.

As we are in the business of risk-taking, there will always be some movements in non-performing assets (NPAs) and credit cost. What is important is that NPAs are at manageable levels.

We delivered 30 per cent growth in profit in the December quarter, and believe that the asset quality will not deteriorate from current levels.

How will the entry of new players impact the market share of existing players?

Getting a bank licence does not guarantee success as we have seen from the 1994 round of licences. It takes years, maybe a decade, to get operational and build a strong franchise, whether for low-cost deposits or any other retail business. Meanwhile, we have worked hard on talent retention to manage the potentially disruptive force of aggressive hiring by new entrants.

In terms of liquidity, has the situation improved after September?

Liquidity has certainly improved between September and November when $34 billion came in through the two swap window initiatives of the RBI.

In the near term, March tax outflows could cause a short period of tightness and in the longer term there is always some additional risk of Fed tapering.

With forex reserves bolstered, risk to liquidity has reduced.

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