?In five years, India?s banking sector will be two-and-a-half times of what it is now?

Chanda Kochhar joined ICICI Bank as a management trainee in 1984 and took over as Managing Director and CEO of the largest private sector bank in the country in May 2009. Since 2005, Kochhar has not missed her spot on the Forbes list of the World?s Most Powerful Women in Business. In this Idea Exchange moderated by MK Venu, Managing Editor, The Financial Express, Kochhar speaks about how the banking sector evolved after the financial crisis, consolidation in the banking business and gender equality at ICICI

DHIRAJ NAYYAR: Do you think that double-digit growth can happen without the government doing anything on structural reform?

The growth will happen and the investments will happen out of the basic drive of domestic consumption. Since consumption is going up, there is requirement for capacity. So, whether it is manufacturing capacity or infrastructure capacity, investments will happen. The question is, can we accelerate the pace of these investments with further reforms and by simplifying procedures? I think we can. That is where we have to hope that some of the procedures get more simplified and investment starts moving off the ground much faster.

SHEKHAR GUPTA: Do you agree that corporates are still scared? That they want to deleverage instead of borrowing more to grow?

I don?t at all agree that they are scared. I think they are very bullish and buoyant and want to invest. The second point, do they want to deleverage? Yes, that is not because of any scare. That is because they want to get their balance sheets in a more robust position to invest. I think it is a prudent thing to do because today if the capital markets are working to our advantage and if foreign flows are working to our advantage and the cash accruals are very robust, it?s important that we prepare the balance sheets for the next round.

DHIRAJ NAYYAR: How has banking evolved over the last 18 months since the scare of October 2008, especially at ICICI?

Indian banking has always been very healthy. So, while there could have been some scares in the minds of people, they were more perception than actual scares and not really anything to do with the underlying factors of the banking system. Today, world over, whatever the banking system is deliberating about?definitions of capital, liquidity reserves?we have had it all in the Indian banking context. The world is today saying that tier-1 capital should be only equity and nothing else; we also had equity. The world is today saying that they should have some liquidity reserves; we always had liquidity reserves. Therefore, I think banking has continued to remain strong. In a way, this is one reason why our economy continued to grow. I believe that the banking sector is like the heart of any economy.

As far as ICICI Bank is concerned, we had a larger share of this perception issue towards the end of 2008. The reason being, we were the most globalised bank amongst the Indian banks. And the whole worry was the fear of unknown, like what could go wrong with the global economy. However, we have come a long way from there and, of course, those perception issues have gone. What it did mean for us was to do a lot of communication, to answer questions from people and clear their doubts. However, I would say that all that is behind us. In fact, today if you see the number of new accounts that we have opened in our banks and the number of new deposits that we collect, it is all much higher than what it was in July-August 2008.

P VAIDYANATHAN IYER: The government has talked about consolidation, but we have not seen consolidation in the banking sector.

The Indian economy requires much larger banking per se. If the economy has to grow at 10%, the banking sector has to grow at least 20%. If you track the history in the last five-seven years, the banking sector has grown at three times the GDP growth rate. In terms of consolidation, large banks are required for the growing economy. However, just consolidation does not really derive synergies of a merger or a consolidation. When you consolidate, if it just adds a balance sheet, that does not change anything for the Indian banking sector. If you then use those synergies in terms of branch structure and utilisation of work force and change the whole dynamics of working, then I think it shows up. I don?t know how much of the current consolidation we are going through really works in bringing up the synergies but that is what the total consolidation means.

MK VENU: I get the impression from the Finance Minister that he wants to link the new licences with the ability of banks to go to rural areas with the banking correspondence model. Will the idea work?

Of course it will, as I see financial inclusion for a bank in India as not simply compulsion. It is an economic imperative. Because it enables you to participate in the next growth economy. Secondly, we should also see how to keep reducing our cost of delivery so we keep making it more and more viable. Now what is financial inclusion? There are five things in my view: one is giving people a place to save their money, second is allowing them to transact in the manner that is convenient. The third is remittance, because lot of these people need to send money to other places within the country. And the fourth is enabling them to make some investments and the fifth thing is lending. We have already rolled out certain accounts, but have aggressive plans for the next three years.

SHEKHAR GUPTA: Tell us something about gender equality in banking and some of your experiences in this institution.

On this issue, I must give credit to ICICI because as an institution, it has always believed in gender equality. It has always promoted women and said that only merit prevails. We have a joke in ICICI that we do not recognise gender. When we deal with a person in ICICI, we do not see if it is a man or a woman. The person is hired, promoted, faces challenges, fired etc only based on his/her merit and performance and that is what has enabled many women to join ICICI. The second part is, women have worked equally, whatever the job demanded?be it working late or travelling a lot. That has enabled merit to come up and that has resulted in a fair share of woman being there.

My experience has been the same. I have worked in an organisation where merit has prevailed. I was never scared to take up challenges and during these 25 years, ICICI really grew and diversified tremendously. I took up every challenge and it helped develop my expertise.

MK VENU: How does a woman look at ?risk?, as opposed to a man?

I do not think there is a difference between a man and a woman there. I think it is the individual outlook towards ?risk? that matters. And it is not that women cannot take risks; rather, risks are important for growth. What is important is one should understand what the consequences of that risk would be.

COOMI KAPOOR: There is a stereotype that women are not good with numbers. You started out with an Arts background?

My Arts background was an economics background. I did my Honours in Economics, then I did cost-accounting as well and then I did my MBA in finance. Why I started out with economics is because I didn?t know that I wanted to go into banking. I was from Jaipur and the career that enamoured me was the administrative services, so I wanted to be an IAS officer. But the more time I spent in Mumbai and the more I got in finance, I just moved to banking.

DHIRAJ NAYYAR: How much credit would you give the RBI for the safety of the Indian financial system?

I give a lot of credit to RBI in the past for ensuring stability and in the last one year for how the policies have been managed. I am a firm believer that the health of the Indian financial system is really a result of two factors: one is clearly our regulatory policies, second is the lending policy of the banks. I think the last year has been challenging because the regulators have been facing multiple challenges, on the one hand to make sure that growth comes back and on the other to manage the challenges of inflation, etc. In that sense, a very balanced approach has been taken towards the monetary policy.

AMBREEN KHAN: I would like you to comment on what can be called ?Brand Chanda Kochhar?.

It?s very humbling to hear this word, Brand Chanda Kochhar. That means two things to me. If that means that I can inspire a lot of young women in the country, that?s a privilege and I hope that I continue to do it in a nice manner. Additionally, it also means that now there is a much larger responsibility to handle that brand.

MK VENU: What is the current women population in ICICI?

It?s 33%, one-third of our employee base.

GUNJAN PRADHAN SINHA: You are at the pinnacle of your career. Where do you see yourself in five years?

As far as I can see, I think I will be active for much longer than five years, maybe 10-12 years. As far as the bank is concerned, we are concentrating for the first five years, since the economy is at such a tipping point of growth. We have done the consolidation for the last one year, so there is some exciting growth awaiting us.

DHIRAJ NAYYAR: In the next 10 years, do you see the balance of power in banking and finance shifting away from the US?

Absolutely. The next five years will mean a further shifting of the balance of power from the Western banks. Look at China as an example. The Chinese banks were nowhere in the top 10 a decade ago, but today, three out of five are Chinese banks, and it is the sheer growth of the country that enabled them to get there. Similarly, Indian banks simply have to benefit from the growth of the country. The banking sector, five years from now, will be at least two-and-a-half times of what it is currently. And the Western banks will not grow at that rate, so you will see the balance of equations changing substantially in just five years.

MK VENU: Can Indian banks fund large overseas acquisitions like Sunil Mittal?s acquisition of Zain?

Indian banks will fund such projects, but asset-liability issues will persist with Indian banks for some time, till the markets deepen substantially. Indian banks have a lot of reliance on short-term deposits and the projects are much longer, but as the bond markets develop more and so on, we will see a deepening of the market. But the ability to participate?at least the rate of 20-25% growth rate?is there, because we are sitting on capital. You look at our example, we have a capital adequacy of 19.4%, I cannot see any bank in the world that would have any larger capital adequacy. So it means that we have so much of capital to grow and to lend. And again I think that if today ICICI Bank is at the 55th position in the world, there is no reason that it cannot be among the top 20 in the next five years.

SUNITI AHUJA: Unlike in the past, you are now asking the customers to come to the bank. Why? And when do you see the interest rates on credit cards coming down in India?

As far as the branch transaction is concerned and customers coming to the bank, I think it?s about the stage of evolution the bank is at, at a given point in time. Three years ago, we had just about 700 branches. It was important to get the customers to do as many transactions outside the branch so that the branches did not become crowded and unmanageable. From there we have reached an evolution where by end of April, we will have 2,000 branches. Last year, we had set up 475 branches, this year we are setting up around 550 branches. This means we are at a stage where we can invite people to come into the branch.

Regarding credit card interest rates, I think the only way by which it can change is when the actual performance on the credit card book for the industry as a whole follows the underlying credit risk. A customer has to realise that making a default at one place actually impacts his/her credit record going forward. It is only then that the actual behaviour of the customer will follow their ability to pay and not their willingness to pay. That is the time when the industry will be ready to afford lower interest rates. Currently, it is going more by willingness to pay not by ability to pay.

DHIRAJ NAYYAR: What is the potential of mobile banking in India since mobile connectivity is much higher than branch connectivity?

There is a huge potential in mobile banking. However, as a country, we have not exploited that side yet. It can really making banking available to a lot more people at lower cost. In this case, the banks and the mobile companies have to work together.

AMBREEN KHAN: Did you ever face any discrimination during your career?

Never. But it was a lot of hard work too. That?s not to say that I had to work harder than a man in order to prove my worth, though it?s a fact that women have to work harder than a man in order to manage a family as well as a career.

?Transcribed by Malabika Sarkar For longer text, visit http://www.indianexpress.com