CSB Bank is focusing on growth led by diversification — both geographical and product-based — managing director & CEO Pralay Mondal told Shashank Didmishe and Shritama Bose. The bank will continue to open 100 branches a year in the medium term, he added. Edited excerpts:
Deposit growth has been lagging credit growth for some time. How are you positioning yourself in the liabilities market?
Banks, including us, are sitting on significant amounts of liquidity. CD (credit-deposit) ratios were mostly in the 70-80% range and, in this cycle, some banks may see their CD ratios rise to 90% or even higher. There’s a lot of competition for liabilities. Larger players have got their treasuries working full-time on raising various kinds of monies from all over the place to ensure that their funding structures are stable. The good thing about our liability franchise is that historically, in all cycles, we have been able to renew almost 90-94% of our customer liabilities. Having said that, we are now looking for growth. We need to garner new liabilities. That’s why we have to spread geographically, add new branches and more products. We are spreading to Tamil Nadu, Andhra Pradesh, Telangana, Karnataka and parts of northern and western India as well. We’re planning to add 100 branches every year. In parallel, we are planning to launch all retail products in the next 18 months.
What are the products you don’t have right now?
Technically, we have many of them, but in practice we don’t sell too many products other than gold loans, SME (small and medium enterprises) loans and a little bit of wholesale, of which 40% is to NBFCs (non-banking financial companies). We have to build up a larger franchise across retail, SME and wholesale. For that, we are building up a technology stack. We’ve got a good leadership team in place and are revamping our entire stack — be it core, LOS (loan origination system), workflow systems, LMS (learning management system), netbanking, corporate netbanking. We’re creating a surround system, and around that we’ll create a digital ecosystem over 12-18 months.
Along with tech, we are getting each of the other products ready. We are building leadership in all the products and services, bringing in heads for retail, payments, branch banking and a chief credit officer. In the next 18 months, we’ll have all the products that a major bank has either directly through our stack or through partnerships.
For example, on home loans we have two products — affordable housing loans which we do ourselves and an arrangement with HDFC home loans, under which we sell their products. We’re going to launch in a month or so credit cards with OneCard by FPL Technologies. We are putting a lot of money into acquiring customers and building the tech stack, but won’t spend too much on building products at this point in time.
What kind of growth are you looking at?
SME is a very important part of our business. Today it’s at 14-15% of our business and we want to take it to 20% within the next three years. Gold loans are about 40-41% of our portfolio. It will continue to do well till all our products are in place and hence, it can go to even 45% of our overall asset book and then start coming down as the other products take off.
On the wholesale side, our strategy will be to look at large SME and mid-market and the emerging corporate group. We do a lot of business on the NBFC side, where the demand remains strong. We look at A and above-rated NBFCs. In the next three years, on a CAGR (compound annual growth rate) basis, we are aiming to grow around 50% faster than the industry.
How much have you mobilised in NRI deposits after the RBI liberalised norms?
If you look at the larger picture, I haven’t seen too much of growth in inward remittances into the country. Hence, I’m not sure if banks have grown much in the NRI business.
The benefit has been about 20-35 basis points, but there are other reasons why NRIs should have put in money, such as the rupee depreciation. Still, it hasn’t happened and there are some structural reasons for that. People in certain geographies, such as in the Middle East, have moved back and some of that NRI money has been converted into domestic money.
Some banks have run one-day and three-day systems to attract customers, but there hasn’t been the kind of traction that was seen in 2014. For us, the scheme has done okay and growth has been the same as in the previous year. Rates in other economies after the Fed hikes have risen multiple times, as compared to the 20-30-bps rise here. The reverse is also true, as a lot of corporates who had raised ECBs have also moved to the Indian markets. Remittances may have fallen further had the RBI measures not been taken.