Karur Vysya Bank has kickstarted its next phase of growth, with inputs from Boston Consulting Group, roped in two years ago to suggest changes. Managing director and CEO K Venkataraman says the idea is to aim for a paradigm shift in existing areas and believes the team is well-equipped to take up the challenge. Venkataraman tells Sajan C Kumar how KVB plans to become a one-stop-shop financial super market.
The bank is now in its 95th year?
We are targeting a business of R1, 25,000 crore by 2016; this March we hope to be at R55,000 crore with deposits touching R32,000 crore and advances reaching R23,000 crore. We are opening 10 more branches in next couple of months and next year the bank intends to open 100 more branches, in unbanked areas as per the directive of the Reserve Bank of India. We will continue focus on SMEs and agriculture segments with the existing network of 442 branches and 765 ATMs.
What are the major planks for the third phase of growth?
We are set for a paradigm shift across activities and want to bring in a major transformation in the organisational approach, business segmentation and in-bank customer experience. We will be doing all these in a timeframe of five years. BCG has given us broad proposals on various segments of banking operations and we will be charting our own course of actions based on them. The entire business model transformation is necessary because earlier the bank was smaller but with the growth, the scale has increased. We need a slightly different model.
Can you share the plans on network expansion?
We have been concentrating on southern states all these years, but now we want to explore the all India market, study behavioural patterns, economic activities as well as risk factors, before taking a big plunge. BCG has given us different models for this initiative and we will focus on states such as Gujarat, Maharashtra, Delhi and Uttar Pradesh. Currently, we have a small presence in different non-south states other than Jammu & Kashmir, Himachal Pradesh and North-East. We are planning to increase the presence there by opening more branches in clusters and we fell that would create awareness. The bank has also aspirations to open branches overseas, especially in countries like the US and Singapore.
What kind of resources would you need to implement this plan?
Scaling up human resources will be a key issue. We will revamp the credit process and operative models. While the entry level recruitments can be handled smoothly, the senior level entries may be a concern for the bank, as there could be some integration issues, if it has to take people from new generation banks. We will have separate heads for a slew of business verticals, to be created as part of the organisational revamp. Hence, we would be recruiting a substantial number of people at both junior and senior levels.
Your outlook for the near term?
We are adopting a cautious approach as the present economic environment hasn?t been conducive for faster growth. In this scenario a 30% growth on business is quite high, but sustainable, only if you make some compromises. What we did this year was that we compromised on margins since we want to keep achieve a good top line growth and subsequently opted for high quality asset. Going forward we will be taking steps to save margins and also scaling up fee-based income. The bank will also be focusing more on treasury operations.
How has been your asset quality during all these years?
Our NPAs have never exceeded R300 crore in last ten years, except for the December quarter. But our asset portfolio has grown from R3,000 crore and now stands at R22,000 crore. Despite such large growth, our npas are below R300 crore. Lower npas and higher provision coverage are comfort factors and with half of my quarterly profit we can make the npa zero, because the bank has already been providing 80% provision coverage. While the net profit up to third quarter of 2011-12 was R352.93 crore, the net owned funds are R2717 crore. The bank is adequately capitalised with a capital adequacy ratio of 13.25% (Basel-II), which is well above the regulatory limit of 9%. It has been earning profit since inception and declaring dividends uninterruptedly.
What are the main factors that helped shape the bank?
The bank has always stayed away from the so called flashy and spectacular growth path, taking a well monitored and cautious approach. We have all along been trying to build strong fundamentals, instead of just focusing on incomes, profit and boosting of shareholder value. Maintaining a balance sheet which is as good as or better than that of new generation private banks is not an easy task. KVB was started in the year 1916 in Karur, then a small textile town with a vast agricultural background. What started as a venture with a seed capital of Rs one lakh has grown into a leading financial institution.