Money & Banking

Physical branches are an important delivery channel for Kotak Bank: Shanti Ekambaram

K Ram Kumar Mumbai | Updated on November 22, 2019

There was consumption boost during the recent festival season(Dussehra to Diwali) as manufacturers, dealers and financiers came together to offer customers good deals, according to Shanti Ekambaram, President, Consumer Banking, Kotak Mahindra Bank. This is underscored by the pick-up in demand for cars and mobile phones flying off the shelves during the billion-dollar sales by online marketplaces. In an interaction with BusinessLine, Ekambaram, who has been with the Kotak Group for over a quarter century, says that while economic challenges remain, the corporate tax rate cut should boost investments, thereby giving a fillip to growth. Excerpts:

What is your assessment of the state of the economy?

When you look at the broader economic indicators, I think challenges still remain.

The index of industrial production has contracted (in August and September). There has been a slowdown. The monsoon has been both good and devastating. So many places have had floods. There was loss of crop. There has been some moderation in rural demand.

But I am hoping that it (monsoon) will give a flip to agriculture and that there will be a little bit of post-monsoon consumption boost in the busy season. Thanks to the very attractive corporate tax (15 per cent) rate, investments, whether it is infrastructure or non-infrastructure, should start picking up This will aid growth. I think markets have already taken the cue and growth is coming back.

What do you make of the bind that the real estate sector is currently in?

The real estate sector is still not out of the woods. Residential real estate is doing well in certain pockets (such as Hyderabad, Bengaluru, Pune and Ahmedabad) and at certain price points (up to ₹1 to ₹1.5 crore).

Above a certain price point, it is still difficult. People are buying finished inventory. With very early stage construction, there are still issues. Affordable housing went down a little bit. It will probably come back.

With the economic downturn, is there concern on bad loans increasing

in the retail portfolio?

We have to be little tighter (on underwriting). We have to be careful because of the environment, jobs and other things. Whenever there is excessive lending to one sector, you should always be more careful like what happened with wholesale; now, everybody has gone into retail in the last one year.

Large banks such as SBI have cut their savings bank rates. How come you are holding on to the old rates?

We have always had our strategy on saving bank – it has to give the bank a certain growth, and then it has to be value-accretive (for the customer).

It is significantly cheaper than term deposit. Average cost of savings is around 5.3 per cent, or thereabouts. Our one-year and 390 days TD rates today are at 6.40 per cent and 6.50 per cent, respectively. So, we go by the absolute cost of savings. We have savings account in different buckets – up to ₹1 lakh (4 per cent interest) or ₹1 lakh to ₹10 lakh (6 per cent), and above ₹10 lakh (5.5 per cent).

With digital transactions growing by leaps and bounds, do you see the need to expand branch network?

Branches are still very critical. We have about 1,500 branches. Physical network has to be interwoven with digital strategy for both acquisition as well as service. You can acquire (customers) digitally and service them physically. You can acquire physically and move them to digital. So, it is a ‘phygital’ world.

Even if an account is opened digitally, a customer likes to see if he can go to the branch. Banks will continue to put up branches, and we continue to put up branches. We will put more branches where there are more business banking customers, current account customers, business customers, and lending customers.

With saving bank customers, we will choose clusters, but people are used to doing (transactions) digitally. But branches remain an important delivery channel and, across banks if you see, they are expanding branch network. Formats are changing, sizes are changing, and what you put inside the branches are changing. At least for the next three years, banks will continue to expand and we are no exception. We keep filling gaps and keep expanding. This year, I think, we will end up adding close to almost 100 branches.

How about ATM network?

Notwithstanding the adoption of digital payments, customers continue to use ATMs for cash, and we have to keep expanding network wherever our clusters are. It is also that you can go to any bank and use a card as long as we ensure the networks are sufficient. ATM is a service for a customer.

Branch is both acquisition and service. ATMs are also changing. They are moving into digital lobbies, doing more than just cash withdrawal – you can deposit cash, withdraw cash, and deposit cheque. They have become multi-functional little outlets, as they say. We currently have 2,400-odd ATMs.

Published on November 21, 2019

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