‘We are keen on expanding our consumer banking business’

Sanjeev Lall, Head, Institutional Banking Group and Branches, DBS

Stress on our assets not beyond the banking system's: Sanjeev Lall of DBS

Mumbai, Nov. 6

DBS is among the largest foreign banks keen on following the wholly-owned subsidiary (WOS) model in India. . More branches will be key to the bank’s plan to venture into the retail banking space, according to Sanjeev Lall, Head, Institutional Banking Group and Branches, DBS. In an interview with Business Line, Lall speaks about the bank’s business in the current environment and its strategy to battle the slowdown.

Excerpts from the interview:

How has the current economic environment affected DBS’ business?

DBS is primarily in the corporate lending space. Given the slowdown in economic growth, corporates are not growing at the same pace compared to the previous year. There are a lot of liquidity issues, too. From a credit standpoint, they are the most affected. Since we lend only to corporates, our growth is related to theirs. We have seen modest growth, and our year-on-year credit growth has been flat.

What are you doing to battle this moderation in growth?

It is about being with the market. We were used to double-digit growth. Now, it will largely be in line with global growth. We will continue to support the corporate sector and ride with it as this is the segment which will stay with us. From the strategic point of view, we will also look more at lending to the SME (small and medium enterprise) segment for the next five years.

But SMEs in the recent past have seen a lot of de-growth and contributed to rising bad loans for other banks…

In terms of numbers and businesses, the SME segment is huge. There are a large number of businesses that are run very well. But they need bank financing to support them. We are a recent entrant in the SME segment and our aim is to grow this business to 25 per cent of the total book (from 7-8 per cent now) in the next five years.

Given that credit growth has been fairly flattish and corporates not earning sufficient returns on their investments, are there big asset quality concerns?

Asset stress is there across the board…across the market. Our asset stress is not beyond what the banking system is facing (in the year ended March 31, 2013, the bank’s net NPA ratio as a percentage of net advances grew nearly fourfold to 2.37 per cent from 0.60 per cent, a year ago).

We have had flattish growth over the past 6-12 months. That does not mean business is not happening.

Corporates are not borrowing for capital expenditure purposes as much as they used to because expansions are far less now. They are more focussed on meeting working capital expenses because there is a big liquidity crunch.

In instances where you are facing stress, are you pulling the plug?

See…pulling the plug is a very strong word. I mean, I don’t think any bank will pull the plug. I know there are talks like these.

But you cannot pull the plug. If you do, then you destroy everything. You have to work jointly. In the end it is in common interest…we have to find a solution

DBS has spoken about embracing the subsidiary model. How many more branches do you look to open, going forward?

It is difficult to put a number now, but we are very keen on going the subsidiary way. We want to have a far larger branch network and get the treatment that banks are getting locally. We are quite comfortable with the priority sector lending targets. We wish to have a presence across the country and segments.

We are also keen on expanding our consumer banking business. For this, we will require a big branch network.

What will a foreign bank do in an unbanked rural area given that you will again face very stiff competition from local banks?

It is going to be a challenge. You have to build a network to become efficient. We will be there in the rural areas as mandated by the RBI. We will have to have the cost of funds aligned to meet the business needs.

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Published on November 06, 2013

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