IndusInd Bank has among the best track records in the industry, having consistently delivered good profits and reined in non-performing assets.
IndusInd Bank has among the best track records in the industry, having consistently delivered good profits and reined in non-performing assets. Romesh Sobti, the bank’s managing director and chief executive, tells Bhavik Nair and Shobhana Subramanian that the bank has been cautious while underwriting loans. Armed with the latest technology and products, IndusInd is ready to tap every opportunity, he says. Edited excerpts:
How big do you estimate your balance sheet will be in five years?
It’s not so difficult to predict as we are growing at around 25% and 30% annually, with the base still being relatively small at Rs 1.25 lakh crore. So we should be doubling this in the next three years. Today, we have less than 1% market share.
With transactions now more IT-driven, can you win share from public sector banks?
Personally, I feel that we are already growing at our optimal rate of growth because if you press the pedal harder, something gives somewhere.
Is the growth coming from the economy or are you winning it from the competition?
I don’t think we are taking away anything from anybody. The cake is growing and we are taking a part of the growing pie. Also, because of the slowdown in the state-owned sector, the additional demand from existing clients is not picked up and spills over to the private sector. But I am very wary of accepting the proposition that huge shifts in market share will take place. Where is the capital? Even though private sector banks are better capitalised, a 10% shift in balance sheet means huge amounts of capital.
Can’t the loan book be driven by CASA (current account, savings account) since younger customers want service?
The CASA market share is a different sort of proposition. You bank with somebody because of convenience; the bank next door and who is always the bank next door.
But isn’t the idea of a bank next door going away?
The part that which is going away is at the bottom end of that pyramid. This is the emerging aspirant bank account holder, right? But the values there are low; large volumes, but low values. So you catch them there and they will be really solid customers later.
But you do want to catch them…
I want to because we do life-cyle banking and we want to catch them at every stage. What I am saying is immediate shifts in CASA will not happen because CASA is very sticky. In three years’ time, the game will change; today we are selling personal loans through our branch, website, a bank aggregator and through a business correspondent.
But I don’t believe the PSUs will sit and watch private sector banks take it all away; they will wake up.
Are electronic transactions picking up?
Approximately 86% of our transactions are electronic but a lot of this happens in the back office, for instance in payment transactions—RTGS, IMPS, ECS, NEFT. The other shift is in online buying and the third shift is in payments. So we may see a slight shift from savings bank accounts to wallets. A wallet is a dead account — with no interest — but today it is still beneficial to you because you get cash backs. Once cash backs stop, what is the proposition?
Do you stop customers from loading onto other wallets?
It’s a free market, we play it by giving incentives. If an IndusInd customer uses another ATM, he is alerted about the reward points he could have earned with us. I will incentivise you; not disincentivise you. That’s the way to do it.
What share of transactions is done on mobile?
Mobile banking today is a very small piece but we launched a new mobile banking app, about a month ago, and it is state-of-the-art. All this will become hygiene, just like you use an ATM today. The difference between yours and mine will be three months. The percentages are growing in three digits month-on-month, the pace is fast. But it is such a small base.
So will personal loans be dealt with in the mobile banking and net banking space?
You can take a personal loan from us from the site, but we do not do a 20-second loan. Personal loans are unsecured loans, they are in the highest risk category. These 20-second loans are pre-approved loans. It’s not that I process it in 20 seconds. And every bank can do that. It is a question of how fast you want to grow that way. If a loan originates on a Bankbazaar, it has to come into my risk chain and I will approve it. I am not delegating that.
IndusInd has stayed out of all large corporate consortia…
It was a combination of good fortune and choice. Always has to be.
But you do want to grow the corporate book meaningfully, don’t you?
Yes, we want to balance the books. And these are cycles that come and go, you have to ride them. Because most bad debts are created in good times. So, in good times you push the pedal. But, through the cycle you must have a consistency in your loan book quality.
Vehicle financing is a big part of your book so would you not like to diversify the risk a little bit ?
Yes, over the last five years the diversification has been happening. When the management change happened at IndusInd eight years ago, CVs used to be 60% of the book but today, MHCVs are only 17% of the book. The corporate side has grown and within retail we have got vehicles and non-vehicle retail as well. We bought the credit cards business from Deutsche Bank about four years ago and then we built the loan against property business.
You bought the credit cards portfolio from Deutsche Bank…
When we bought it, it was worth Rs 150-160 crore and by the end of this year, it will be, say, Rs 1,000 crore or Rs 1,100 crore. But that’s not a big book by any standards.
But our proposition is to make people spend on the credit card, not lend against it. So essentially, it’s a fee business. We make you spend, give you such propositions that you want to spend. When we took it from Deutsche it was loss-making, but within three months, it turned around and it’s profitable.
And none of the clients has left us, although Deutsche had a very solid brand and IndusInd, when we bought the business, did not have that. But people stayed because of the propositions. Having our plastic in your wallet is very critical for us because there is a huge branding element in it. It has been a PBT positive business for some time now.